Holiday Gifts, Prizes, or Parties can be taxable wages
- December 10, 2018
- Posted by: alaaalhajissa
- Category: Uncategorized

The tax implication of employers’ holiday parties, prizes or gift-giving is one of the most recurring challenges employers face at the year-end at virtually all workplaces. Here is some tax rule every employer should know of if they are working towards appreciating their employees with gifts, prizes, and parties at this holiday season.
The first of all rules is the general tax rule under the Internal Revenue Code Section 61, which states that; “all forms of compensation are subject to income tax unless specifically excluded by the tax code.” Although, this rule is mostly ignored by employers when giving gifts, or prizes at companies’ holiday parties. Some employers do not see gifts, prizes, and parties as a means of compensating their employee for their past labor and their future commitment. While some ignorantly believe that the gross income tax code Section 102 (a) excluded gifts and prizes.
The first of all rules is the general tax rule under the Internal Revenue Code Section 61, which states that; “all forms of compensation are subject to income tax unless specifically excluded by the tax code.” Although, this rule is mostly ignored by employers when giving gifts, or prizes at companies’ holiday parties. Some employers do not see gifts, prizes, and parties as a means of compensating their employee for their past labor and their future commitment. While some ignorantly believe that the gross income tax code Section 102 (a) excluded gifts and prizes.
However, Section 102 (c) of the gross income tax code, provides that; the exclusion of prizes and gifts has nothing to do with whatever amount an employer transfers to or concerning the benefits of an employee. But when a gift is given to an employee by an employer, it is therefore taxable under this Section 102 (c), except an exception is attached to it.
The basic exception to the rule that binds holiday gifts, prizes, and parties to taxes can be seen under the code section 132 (a)(4) – this code excludes some certain gifts and prizes from taxable income. This section provides that gross income excludes any fringe benefits, and thus qualifies gifts, prizes, and or parties as a de minimis fringe benefit. Also, Section 132 (e)(1) states de minimis fringe benefit as any property or service, the value of which is so minute as to make accounting for it unreasonably or administratively impracticable. To identify items that fall to the category of de minimis, the rate with which similar items have been provided to the employee by the employer should be put into consideration.
Department of the Treasury’s regulations Section 1.132-6(e)(1) of the United States gave examples of items that are tax excludable from employee’s gross income. Examples of such items that are tax excludable are as follows;
• Local telephone calls.
• Traditional birthday gift.
• A holiday gift of items and not cash.
• Turkeys, ham, and other items of nominal value at Christmas and other holidays.
• Occasional sporting event tickets.
• Occasional private utilization of the employer’s photocopying machine by an employee.
• Giving of doughnuts, soft drink, and other snack materials to the employee by the employer.
• Irregular cocktail parties, meals, and seasonal hangout for employees by their employers.
• Giving of flowers, books, and other similar items to employees at special situations.
While, Department of the Treasury’s regulations Section 1.132-6(e)(2) of the United States gave examples of items that are not tax excludable, and will be included in employee’s gross income. Examples of items that are not excludable from employee’s gross income include;
• The use of leased or owned properties of an employer by an employee.
• Tickets to events and sporting centers.
• Membership in an athletic facility or a private country club.
• Cash, gift certificate, or similar items that may easily be exchanged for cash.
13 Comments
Leave a Reply
You must be logged in to post a comment.
Great content! Super high-quality! Keep it up! 🙂
Great post.
I enjoy browsing your site. Thanks!
Hello there! This is my first comment here so I just wanted to give a quick shout out and say I really enjoy reading your articles. Can you recommend any other blogs/websites/forums that deal with the same subjects? Thanks a ton!
As I site possessor I believe the content matter here is rattling wonderful , appreciate it for your hard work. You should keep it up forever! Best of luck.
Hi mates, its impressive paragraph concerning educationand fully explained,
keep it up all the time.
I enjoy reading through a post that can make
people think. Also, thank you for allowing for me to comment!
You ought to be a part of a contest for one of the best sites on the web.
I most certainly will recommend this web site!
“I hope to give something back and aid others like you aided me.”
Excellent blog you have here but I was curious if you knew of
any community forums that cover the same topics discussed
here? I’d really love to be a part of group where I can get feed-back from
other knowledgeable people that share the same interest.
If you have any suggestions, please let me know.
Thanks a lot!
Hello Jason .Thank you for your comment .Try to find National Association of Tax Professionals (NATP) Group on Facebook .It is good for asking questions
Magnificent website. A lot of useful information here.
I’m sending it to some buddies ans additionally sharing in delicious.
And of course, thank you for your sweat!
Thank you Donald .It is my pleasure