Churches want to acknowledge the hard work of their employees and volunteers, so they frequently give gifts around the Holidays. Many of these holiday gifts fall into the category of “De Minimis Fringe Benefits”.
In IRS terms, a “De Minimis Fringe Benefit” is a benefit with a value too small or too difficult to value. For example, if you bring donuts and coffee to the office, the IRS won’t expect you to estimate the value of each individual donut, or to track the value of how much coffee each employee drinks. It’s just too difficult to do.
Meals or low-value infrequent gifts like a small turkey can fall into the “De Minimis” category and do not need to be reported. While small, infrequent gifts don’t need to be tracked, many Churches run into problems when they start handing out gift cards.
De Minimis Fringe Benefits can never include gift cards. You can’t say that the value of a gift card is too difficult to track because you already know the value- A $20 gift card is worth $20. If you give an employee a $20 gift card, you also have to report that $20 as compensation on their W-2. The same is true with cash. If you pay a holiday bonus in cash to employees, that needs to be reported to IRS as taxable income.
Do you have more questions about holiday gifts? Clergy Financial Resources can help. Visit our blog at https://www.clergyfinancial.com/resources/blog/ for many articles about frequently asked questions, or visit https://www.clergyfinancial.com/resources/proadvisor/ to schedule a Pro Advisor conference today!
Clergy Financial Resources serves as a resource for clients to help analyze the complexity of clergy tax law, church payroll & HR issues. Our professionals are committed to helping clients stay informed about tax news, developments and trends in various specialty areas.
This article is intended to provide readers with guidance in tax matters. The article does not constitute, and should not be treated as professional advice regarding the use of any particular tax technique. Every effort has been made to assure the accuracy of the information. Clergy Financial Resources and the author do not assume responsibility for any individual’s reliance upon the information provided in the article. Readers should independently verify all information before applying it to a particular fact situation, and should independently determine the impact of any particular tax planning technique. If you are seeking legal advice, you are encouraged to consult an attorney.
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