'Tis The Season To Give

by Susan Martin

As the holidays approach, employers often consider “gifting” employees with bonuses, gift cards or even frozen turkeys. What’s the trend this holiday season – and does the gift really have to be taxed by Uncle Sam?

The Survey Says
According to a 2014 survey of 197 metro St. Louis businesses conducted by AAIM Employers’ Association, 65% of the survey respondents provide gifts to their employees during the holidays.  

Topping the gift-givers’ lists this season are money-related gifts, such as gift cards, cash or bonuses (provided by 43% of the businesses). Second in popularity (22%) are food items, including hams, turkeys or gift cards for food items. The remaining employers say “happy holidays” with company logo apparel and other assorted items such as mugs, books or the coveted paid day off.

Issues to Consider
According to the IRS, if the value of the gift is so small that accounting for it is impractical, it is considered “de minimis” and exempt from tax withholding. Because determining the value of a single turkey, book, mug or other one-time holiday gift would be impractical, this type of gift would not be considered taxable. However, the IRS never considers cash or gift cards a de minimis benefit, and therefore they are taxable as income. Be aware that bonuses present complex tax issues and should be discussed with a tax expert.

Susan Martin (susan.martin@aaimea.org) is a research and solutions specialist for AAIM Employers’ Association, which helps Missouri and Illinois companies manage their people and processes.