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Dear Tax Talk,
The company I work for gives us T-shirts for certain achievements. Now they are saying from now on they are charging a gift tax. They said that they would pay the tax for us, but we have to claim the value of the shirt as income.
— Greg
Dear Greg,
It’s not the government that wants the shirt off your back. Certain fringe benefits can be excluded from income. In the category of achievement awards, the law recognizes exclusions for length-of-service and safety awards. If the company provides an employee a prize or award that is neither for length of service nor safety, then technically that item is income to the employee unless it can be excluded under some other rules.
In my opinion, a T-shirt is usually considered a promotional item of de minimis value. Items of de minimis value are considered an excludable fringe benefit. Many companies offer promotional items with company logos as a form of advertising. These items would not be considered compensation to an employee if they are of nominal value. For example, coffee mugs and pens provided to employees would not be compensation. What would your employer dream of next, a gift tax on your birthday cake?
To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. Taxpayers should seek professional advice based on their particular circumstances.
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