One of the memories I have of working at UPS was every Thanksgiving, a truck would be loaded with turkeys. Each employee would grab his or her holiday gift on the way out of the facility carrying the frozen box to the car. After almost 15 years, it is still one of the things that stands out to me.
Holiday gift giving to employees helps employees feel appreciated and helps lift the spirits as the days become longer and leaving work now occurs in the dark rather than with the gleaming sun to drive home in. It also helps employers show they appreciate the work that has been done throughout the past year.
However, as many who have received cash bonuses or expensive gifts know, the IRS requires that cash, gift cards, and expensive gifts be taxed. This can be a surprise for an employee if the taxes are taken out in a paycheck after the gift was given. It can also be an additional expense the a small business owner may not account for when giving the gift if the business owner is required to pay his or her share of employment taxes on the gift.
So how to get around paying taxes? I suggest buying small gifts that have more meaning. This is because “de minimus” gifts are not taxed by the IRS as the IRS understands the burden of taxing everyone for their $10.00 turkey would be an administration nightmare. For employers that feel their employees have earned more than a turkey or other de minimus gift, the gift of additional paid holidays such as Christmas Eve, the day after Christmas, New Year’s Eve, or the day after New Year’s may be a good suggestion. I have even heard of some companies that tell their employees they may take the full week between Christmas and New Year’s off – especially since for some companies, most of their employees are gone. For those companies that will miss their employees if they aren’t there (i.e. retail, restaurants, etc), additional vacation days that can be used after the holidays are over are nice too!
If you have any questions about giving holiday gifts, always double-check with your accountant or attorney! As always, you can call me, your small business attorney, at 720-258-6647 or email me at Elizabeth.firstname.lastname@example.org.