You heard of the Sales Tax Holiday, how about a Tax Picnic

How do I Plan a picnic for my employees that is a tax-free benefit

Some gifts to employees are too insignificant for the IRS to care about. The IRS calls these gifts de minimis fringe benefits. A de minimis fringe benefit is any gift or service with a value so small that accounting for it is unreasonable or administratively impracticable. The value must be nominal or very low. Turkeys given to employees at Thanksgiving are a good example.

Deduction for employer

If a gift is de minimis, you can deduct the cost of the gift as a business expense. Its a win-win situation for your employees too. They do not have to include the value of the gift in their taxable incomes or pay employment taxes on the gift.

Examples

The precise meaning of de minimis is difficult to define. Lots of gifts and services are treated as de minimis. Some are easy to identify; others are not. A list of de minimis gifts has been developed over many years by the IRS and the courts. Its the result of a lot of litigation.

Here are some frequent examples:

--Coffee and soft drinks;

--Doughnuts and other pastries;

--Fruit;

--Flowers;

--Holiday and birthday gifts with a low monetary value;

--Local telephone calls; and

--Photocopying.

Meals

Meals are tricky. Meals are not de minimis merely because an employer seldom feeds its employees or, when it does feed them, it fails to keep track of who had what. Substantial food and beverages are not de minimis. For example, the IRS ruled that an employer that paid between $100 and $700 per person to cater a luncheon at a business conference for its salespersons could not deduct the cost of the meal. In that case, the IRS determined that accounting for the cost of the meal was reasonable and administratively practicable.

Picnics are treated differently. So long as they are occasional and food costs are insubstantial, picnics generally qualify as de minimis fringe benefits. You can deduct the cost of the picnic and your employees dont have to include the value of the picnic in their incomes. Youll want to keep costs reasonable. An extravagant feast is not a picnic. Standard picnic foods and desserts, such as hamburgers, hot dogs and apple pie, should be deemed insubstantial. Contact our office today so we can help you plan an event for your employees that satisfies all of the de minimis rules.