John Carroll University
As we embark upon the giving season, it seems prudent to remind the community of the Internal Revenue Code (IRC) and associated Treasury Regulations regarding the giving of gifts and tokens of appreciation.
Gifts to Employees: In some circumstances, the University may choose to give a gift or token of appreciation to its employees. Gifts to employees are deemed by the IRS to be a taxable fringe benefit which must be reported as earned income. De minimis benefits, however, are excluded from this requirement. A de minimis benefit is any tangible good or service provided to an employee that has so little value that accounting for it would be unreasonable or administratively impractical. Examples of de minimis benefits include the following:
Cash, no matter how little, is never excludable as a de minimis benefit. Gift cards, gift certificates, or any financial instrument redeemable for cash are all considered cash and thus are not excludable from income as a de minimis benefit. Cash and cash equivalents are always taxable to the employee. This includes adding money to a Carroll OneCard.
To be compliant with IRC, the University must include all cash and equivalent gifts and gifts of tangible goods over $100 in an employee’s taxable income. Since this is administratively burdensome, the University requests that departments refrain from giving cash and cash equivalents or gifts of tangible goods in excess of $100 to employees of the University. Any gifts of cash to an employee must be paid through the payroll department for proper withholding and reporting.
Expenditures for cash or cash equivalents such as gift cards, gift certificates, money orders, traveler’s checks, or gift checks for employees will be treated as a personal expense of the purchasing employee and will not be reimbursed by the University. Personal purchases are not allowed on University purchasing cards per the Purchasing Card Policy. If in error a purchasing card is used for this purpose, it is expected that the employee will reimburse the University with personal funds.
Gifts to Non-Employees: In some instances, the University may choose to give a gift or token of appreciation to non-employees such as donors or key constituents. In these circumstances, Accountable Plan rules as defined by the IRS and as required by fiscal policy must be followed. An Accountable Plan requires an original receipt plus complete business purpose substantiation including the name of the recipient, the gift given, the business purpose of the gift, the date and amount of the gift, and the vendor from whom the gift is purchased.
Of course, all gifts and tokens of appreciation whether given to employees or non-employees are always subject to the availability of funds and should support strategic goals of the University.
Please feel free to contact Andrew Fronczek, executive director of purchasing and auxiliary services, at 216.397.3025 or Tom Reilley, manager of purchasing and accounts payable, at 216.397.4275 should you have any questions or concerns. Thank you.