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The IRS De Minimis Rule Gift certificates for turkeys and hams that are given as holiday gifts to employees may not be tax...
“ Cash Equivalent” Gifts Are Taxable <ul><li>Under IRS regulations, “cash equivalent” gifts must be reported by the employ...
The IRS De Minimis Fringe Benefit Rule <ul><li>Certain employee gifts are excluded if they meet the following criteria: </...
Our Certificates are not “cash equivalents” <ul><li>Cash gifts are always taxable, regardless of the amount. </li></ul><ul...
The “Impractical Accounting” Rule Also May Exclude Our Certificates <ul><li>Unlike gift certificates with consistent pre-s...
Significant Tax Advantages <ul><li>Our gift certificates qualify under all four of the IRS criteria: </li></ul><ul><ul><li...
Disclaimer <ul><li>We offer the statements above only as our opinion, not as expert legal or accounting advice.  Please co...
IRS Documents:  The De Minimis Exclusion <ul><li>Taxable Fringe Benefits , January 2009, p. 14 </li></ul><ul><ul><li>Provi...
IRS Documents:  The De Minimis Exclusion <ul><li>Publication 535,  Business Expenses , for 2008 returns, p. 7: </li></ul><...
Contact us today ! <ul><li>Online:  www.pfrcorporategifts.com </li></ul><ul><li>Email:  [email_address] </li></ul><ul><li>...
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The Irs De Minimis Rule

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Turkey and ham gift certificates as holiday gifts for employees may not be taxable under the IRS de minimis benefits exclusion rule.

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Transcript of "The Irs De Minimis Rule"

  1. 1. The IRS De Minimis Rule Gift certificates for turkeys and hams that are given as holiday gifts to employees may not be taxable. Please continue to see the details… © 2010 PFR Corporate Gifts, Inc.
  2. 2. “ Cash Equivalent” Gifts Are Taxable <ul><li>Under IRS regulations, “cash equivalent” gifts must be reported by the employee as income, and should be processed through payroll by the employer. </li></ul><ul><li>This includes: </li></ul><ul><ul><li>Cash gifts </li></ul></ul><ul><ul><li>Retailer gift cards </li></ul></ul><ul><ul><li>Many gift certificates </li></ul></ul><ul><li>But there are exceptions… </li></ul>
  3. 3. The IRS De Minimis Fringe Benefit Rule <ul><li>Certain employee gifts are excluded if they meet the following criteria: </li></ul><ul><ul><li>The gift must be of nominal value. </li></ul></ul><ul><ul><li>The gift must be infrequently given. (Holiday gifts are specifically mentioned, as are turkeys and hams.) </li></ul></ul><ul><ul><li>The gift must not be cash or cash equivalent. </li></ul></ul><ul><ul><li>Accounting for the gift must be administratively impractical or unreasonable. </li></ul></ul><ul><li>The last two of these points distinguish our gift certificates from retailer gift cards and most other gift certificates… </li></ul>
  4. 4. Our Certificates are not “cash equivalents” <ul><li>Cash gifts are always taxable, regardless of the amount. </li></ul><ul><li>Gift cards and gift certificates are cash equivalents if they: </li></ul><ul><ul><li>Are easily converted to cash; or </li></ul></ul><ul><ul><li>Allow cash back; or </li></ul></ul><ul><ul><li>Are redeemable for general merchandise. </li></ul></ul><ul><li>Gift certificates (such as ours) that are good only for a specific item and do not offer a cash back option may qualify for the de minimis exclusion. </li></ul><ul><li>Furthermore… </li></ul>
  5. 5. The “Impractical Accounting” Rule Also May Exclude Our Certificates <ul><li>Unlike gift certificates with consistent pre-set dollar values, our gift certificates all have variable values. </li></ul><ul><li>They are good for a free item UP TO a maximum limit and will be redeemed for the actual value of the item the consumer selects in the supermarket. This will vary with each transaction. </li></ul><ul><li>It would be unreasonable, if not impossible, to account for the redemption value of each certificate. </li></ul>
  6. 6. Significant Tax Advantages <ul><li>Our gift certificates qualify under all four of the IRS criteria: </li></ul><ul><ul><li>Moderate value </li></ul></ul><ul><ul><li>Infrequently given </li></ul></ul><ul><ul><li>Not a cash equivalent </li></ul></ul><ul><ul><li>Unreasonable to account for each transaction </li></ul></ul><ul><li>Our gift certificates offer these advantages: </li></ul><ul><ul><li>Not taxable to the employee </li></ul></ul><ul><ul><li>Do not need to be processed through payroll </li></ul></ul><ul><ul><li>May be deducted by the employer as a non-wage business expense </li></ul></ul><ul><li>But please read our disclaimer… </li></ul>
  7. 7. Disclaimer <ul><li>We offer the statements above only as our opinion, not as expert legal or accounting advice. Please consult your attorney and accounting professionals for counsel relative to your specific circumstances. </li></ul><ul><li>See the following slides for IRS publications referenced here… </li></ul>
  8. 8. IRS Documents: The De Minimis Exclusion <ul><li>Taxable Fringe Benefits , January 2009, p. 14 </li></ul><ul><ul><li>Provides a summary explanation of de minimis fringe benefits. </li></ul></ul><ul><ul><li>Mentions holiday gifts as examples. </li></ul></ul><ul><ul><li>Defines “cash equivalent” as including retailer gift cards and certificates, and those allowing cash back. </li></ul></ul><ul><li>Publication 525, Taxable and Non Taxable Income , for 2008 returns, p. 5 and Publication 17, Your Federal Income Tax For Individuals , for 2008 returns, p. 46: </li></ul><ul><ul><li>“ Holiday gifts. If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. However, if your employer gives you cash, a gift certificate or a similar item that you easily can exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved.” </li></ul></ul>
  9. 9. IRS Documents: The De Minimis Exclusion <ul><li>Publication 535, Business Expenses , for 2008 returns, p. 7: </li></ul><ul><ul><li>“Gifts of nominal value. If, to promote employee goodwill, you distribute food, or merchandise of nominal value to your employees at holidays, you can deduct the cost of these items as a nonwage business expense. Your deduction for de minimis gifts of food or drink are not subject to the 50% deduction limit that generally applies to meals.” </li></ul></ul><ul><li>Online IRS article, De Minimis Fringe Benefits , last reviewed or updated July 15, 2008: </li></ul><ul><ul><li>Provides a summary of de minimis fringe benefits, including holiday gifts. </li></ul></ul><ul><ul><li>“Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable…A certificate that allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently, and is administratively impractical to account for, may be excludable as a de minimis benefit, depending on facts and circumstances.” </li></ul></ul>
  10. 10. Contact us today ! <ul><li>Online: www.pfrcorporategifts.com </li></ul><ul><li>Email: [email_address] </li></ul><ul><li>Telephone: 801-569-2381 </li></ul><ul><li>Fax: 801-569-1629 </li></ul><ul><li>Postal mail: </li></ul>PFR Corporate Gifts, Inc. 9137 S. Monroe Plaza Way, Ste C Sandy, UT 84070 • LinkedIn: www.linkedin.com/in/pfrcorporategifts
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