Holiday Gifting with a Tax Twist, by Tobi Marshall, CPA, MSA
Updated: Dec 12, 2019
Some holiday gifts you provide to members of your family, employees, and others may also yield tax benefits. Here are some examples:
Employee Gifts – It is common practice this time of year for employers to give employees gifts. Although gifts are generally excluded from the recipient's gross income, an employee cannot exclude gifts from his or her employer as a gift.
However, if the gift is infrequently offered and has a fair market value so low that it would be impractical and unreasonable to account for it, the gift’s value would be treated as a de minimis fringe benefit. As such, it would be tax-free to the employee and tax-deductible by the employer.
A gift of cash, regardless of the amount, is considered additional wages and is subject to employment taxes (FICA) and withholding taxes.
Caution: When a gift recipient is a W-2 employee, the employer must not issue them a 1099-MISC for a holiday gift of cash; the amount must be treated as W-2 income. This is a common error made by employers.
To read more go to Tobi's blog: https://www.tobimarshallcpa.com/blog/holiday-gifting-with-a-tax-twist/44171