Do I Have to Pay Taxes on De Minimis Benefits?

by Deborah Z Mark

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De minimis fringe benefits.

As an employer, you’ve probably heard the term. But what the heck does it mean?

No need to call your accountant. Just keep reading.

A Brief Description

De minimis fringe benefits are those which are so small and infrequent that accounting for them would be unreasonable or impractical.

As far as I’m concerned, any type of accounting is unreasonable and impractical.

Examples

Here are some examples of de minimis fringe benefits:

  • Occasional snacks such as coffee and donuts
  • Occasional tickets for entertainment events
  • Holiday gifts
  • Flowers, books, etc.

Personal use of an employer provided business cell phone is also considered a de minimis benefit.

How to Determine?

If a benefit is occasional or unusual in frequency, it is considered a de minimis benefit. It cannot be a form of disguised compensation. In other words, if an employee is owed overtime, the overtime must be paid, not substituted with a gift.

If a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the portion over a designated amount.

What About Gift Cards?

Gift cards or gift certificates for a certain dollar amount are considered cash equivalents. They are taxable and not considered de minimis benefits.

Cash is considered a wage and is also not a de minimis benefit.

An exception would be for occasional meal money or transportation costs to allow an employee to work beyond normally scheduled working hours.

More Questions?

If you still have questions regarding de minimis fringe benefits, you can call your accountant now.

On second thought, better wait until April 16th.

Be reasonable and practical.

Call managestaff.

We’ll help.

managestaff.

It’s what we do.

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