![]() To be a qualified plan, the average cost of all employee achievement awards for the tax year must be less than $400. Service awards are also subject to a dollar value limitation of $400 for awards under a nonqualified plan, or $1,600 in total for awards made under both qualified and nonqualified plans. The employee must not have received another length-of-service award (other than of a very small value) within the preceding four years.The employee may not receive a length-of-service award within the first five years of employment and.The IRS provides that non-cash length-of-service awards may be excludable if the following conditions are met: Interestingly, the regulation does specifically exclude occasional theater or sporting event tickets (though not season tickets), so perhaps an argument could be made for Hamilton tickets. However, smaller items such as a goodie bag with candy, coffee cup, or a small plant may be safer. Under the IRS guidance, it’s pretty clear that prizes such as iPads, TVs, expensive watches, etc. Generally, to qualify as de minimis, the item must be of “so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or impractical.” Publication 15-b (2022), Employer’s Tax Guide to Fringe Benefits. While the guidance is over 20 years old, it is still referenced in the Fringe Benefit Guide, updated in October 2022. Unfortunately, the IRS hasn’t provided a specific dollar amount that would qualify as “low fair market value.” Back in 2000, the IRS did provide specific guidance that non-monetary awards with a fair market value of $100 do not qualify as de minimis. Traditional birthday or holiday gifts of property (not cash) with a low fair market value.Group meals or picnics for employees and their guests and.Benefits that are notably relevant to holiday celebrations include: IRS regulations ( 26 CFR §1.132-6(e)(1)) provide some examples of de minimis fringe benefits that may be excluded from an employee’s income. Non-cash items (i.e., tangible personal property) are generally not excludable unless they fall under a specific exclusion. This also includes any year-end bonus or other monetary awards. However, the IRS currently says cash and cash equivalents (e.g., gift certificates, gift cards), no matter the value, are never excludable (with very few, limited exceptions). Previously, employers could give employees gift certificates and gift cards without taxing the employee as long as the value was under $25. Employers should keep in mind that certain rewards are considered taxable by the Internal Revenue Service (IRS), and plan accordingly. ![]() Often, these events include prizes, gifts, service awards, bonuses, and other rewards. As the end of the year approaches, many companies host holiday gatherings to celebrate the season with employees.
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