Expired Tax Provisions (Businesses) & Year-End Gift Taxing

Expired Tax Provisions (Businesses): Certain items no longer available for 2014

There are quite a few tax provisions that expired last year. It’s uncertain whether Congress will act in time to make these benefits available for 2014. Some of these provisions include:

  • EXPIRED tax provisionsThe parity for the exclusion from income for employer-provided mass transit passes and parking benefits.
  • The credit for research and experimental expenses.
  • The work opportunity credit.
  • The provision to treat qualified leasehold improvement property, qualified restaurant property, and qualified retail improvements as 15-year MACRS property.
  • The additional first-year depreciation (bonus depreciation).
  • The employer differential wage payment credit for payments to individuals performing active duty military service.
  • The election to deduct certain film and television production costs.
  •  The deduction for energy efficient commercial buildings.
  • The credit for the construction of new energy efficient homes.
  • The manufacturer’s credit for energy efficient appliances.

It is possible that some of these provisions may be extended due to late Congressional action. If that’s the case, we’ll let you know.

Perks and Parties: How year-end gifts are taxed

During the holiday season, it’s not uncommon for businesses to treat employees with vacation time, holiday parties and bonuses. The type of gift—not the reason for it—determines whether it will be taxable to your employees.

HandbellFruit baskets, turkeys, wine or other inexpensive items are considered noncash gifts. As long as the noncash gift is of
nominal value and given infrequently, the gift will be considered a de minimis fringe benefit and will not be taxable.

Expensive noncash gifts, such as watches or iPads, are considered taxable as wages. Cash, checks and gift certificates are also considered taxable as wages. This means that the fair market value of the gifted item or amount must be added to the employee’s payroll wages and is subject to typical payroll taxes including FICA and FUTA.

Another way to show appreciation to your employees is by throwing a company party. Good news! The cost is 100% deductible to the business—not just 50% deductible, like typical meals and entertainment expenses. The party cannot be lavish and extravagant and must be primarily for employees who are not highly compensated. Attending the party is a nontaxable de minimis fringe benefit to your employees.