Hey Compliance Warriors!
You can exclude the value of a de minimis benefit you provide to an employee from the employee’s wages. A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. Cash and cash equivalent fringe benefits (for example, gift certificates, gift cards, and the use of a charge card or credit card), no matter how little, are never excludable as a de minimis benefit. However, meal money and local transportation fare, if provided on an occasional basis and because of overtime work, may be excluded, as discussed later.
Examples of de minimis benefits include the following.
- Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes.
- Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes.
- Holiday or birthday gifts, other than cash, with a low fair market value. Also, flowers or fruit or similar items provided to employees under special circumstances (for example, on account of illness, a family crisis, or outstanding performance).
- Group-term life insurance payable on the death of an employee’s spouse or dependent if the face amount isn’t more than $2,000.
- Certain meals. See Meals, later in this section, for details.
- Occasional parties or picnics for employees and their guests.
- Occasional tickets for theater or sporting events.
- Certain transportation fare.
Some examples of benefits that aren’t excludable as de minimis fringe benefits are season tickets to sporting or theatrical events; the commuting use of an employer-provided automobile or other vehicle more than 1 day a month; membership in a private country club or athletic facility, regardless of the frequency with which the employee uses the facility; and use of employer-owned or leased facilities (such as an apartment, hunting lodge, boat, etc.) for a weekend.
If a benefit provided to an employee doesn’t qualify as de minimis (for example, the frequency exceeds a limit described earlier), then generally the entire benefit must be included in income.
Lisa Smith, SPHR, SCP
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