Are you hoping for a little thank-you gift from the boss this holiday season? Such a reward for a job well done might be nice, but it also could cost you tax-wise.
If your boss is like most, you probably don’t have to worry. Most workplaces present nominal gifts such as turkeys or hams. These are considered “de minimus” fringe benefits by the IRS. That’s Latin for Uncle Sam doesn’t care.
Basically, these types of traditional gifts that promote goodwill to all workers are deemed to have a value that is, in the IRS’s estimation, “so small as to make accounting for it unreasonable or administratively impracticable after taking into account the frequency with which similar fringes are provided by the employer to the employer’s employees.” Whew! That’s tax-code-speak for Uncle Sam doesn’t care.
But, warns the National Association of Tax Professionals, a gift card from your boss that you use to buy the holiday eats could cost you. Since the card is readily convertible to cash value, it doesn’t fall into the de minimus category, says the NATP. The same goes for gift certificates and plain old cash gifts. It doesn’t matter how much or how little the amount. The IRS treats these holiday thank-yous as extra -- and taxable -- wages.
OK, who’s to find out if your boss slips a crisp new $50 bill into your last pay envelope of the year? Probably no one. But it is the rule and I thought you should know, just in case Emma down in accounting only got a $20 and decides to rat out her colleagues that the boss apparently thinks worked a bit harder this year.
While not every company gives its employees gifts, most do have some sort of holiday party. Love ’em or not, they’re a December staple. I certainly hope your company get-together isn’t as awful as the one apparently suffered through in A Corner of the Cosmos: “The food they served made me sick at my stomach. I was awake most of the night.”
You also want to guard against being the life of the office party. Too much of a good time, as detailed in this article on 10 office party don’ts, could be a career killer. In that case, you might find yourself looking for a new job as soon as your office-party hangover clears.
But even then, there’s a glimmer of good tax news: Your job search costs could be deductible!