Academic journal article Journal of Accountancy

De Minimis Fringe Benefits

Academic journal article Journal of Accountancy

De Minimis Fringe Benefits

Article excerpt

Generally speaking, the fair market value of any fringe benefit given to an employee is taxable as income. However, Internal Revenue Code section 132 lists six types of fringe benefits that can be excluded from an employee's gross income, including de minimis fringe benefits: those with values so small that, according to the section, accounting for them would be impractical or unreasonable. The following are examples of tax-free de minimis fringe benefits that are available to employees on a discriminatory basis:

* Occasional personal letters typed by a company secretary.

* Occasional personal use of a company photocopy machine (at least 85% of the machine's use must be for business purposes).

* Occasional cocktail parties or picnics for employees and their guests.

* Occasional supper money or taxi fare for employees due to overtime work.

* Holiday gifts with a low fair market value.

* Occasional theater or sporting events tickets.

* Free coffee and doughnuts.

If an employer offers a fringe benefit not specifically mentioned in the regulations, there are no guidelines to determine if it is de minimis. Employers must request a letter ruling from the IRS asking how a proposed transaction should be treated for tax purposes. …

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