Hyden, Miron & Foster, PLLC Law Blog

Wednesday, June 10, 2015

De minimis According to the IRS

Lawyers have a tendency to casually toss Latin phrases into everyday conversation. De minimis is one of those Latin phrases. It means “concerning minimal things.” The IRS allows employers to exclude the value of de minimis benefits provided to employees from the employees’ wages. A de minimis benefit is any property or service that employers provide to employees that has so little value that accounting for it would be unreasonable or administratively impracticable.  

In short, the government doesn’t want to force employers and employees to spend countless hours figuring out just how much the hotdogs each employee ate at the annual company picnic were worth, but it does want to ensure that employers aren’t able to disguise compensation as small side benefits and thereby get away with not paying taxes on it, so it adopted a policy of not taxing de minimis benefits.  

The IRS lists the following as examples of de minimis benefits:    

  •  Controlled, occasional employee use of photocopier  
  • Occasional snacks, coffee, doughnuts, etc.
  • Occasional tickets for entertainment events
  • Holiday gifts that have little monetary value
  • Occasional meal money or transportation expense for working overtime
  • Group-term life insurance for employee spouse or dependent with face value not more than $2,000
  • Flowers, fruit, books, etc., provided under special circumstances
  • Personal use of a cell phone provided by an employer primarily for business purposes

The key is the value and the frequency of the benefit, and it is very fact-specific, so it is important not to generalize based on the examples above.   

Something the IRS is very clear about is that cash and cash-like items such as gift cards can never be considered de minimis. This is because they are not difficult to account for, even in small amounts.       

If you have questions about the taxability of fringe benefits, please contact  experienced attorneys at Hyden, Miron & Foster, PLLC,  at 501.482.1787 or 888.770.1848. Our offices are conveniently located in Little Rock, Conway, and Hot Springs Village.

 


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