Certified Payroll Professional Practice Exam

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What rule applies to De Minims fringe benefits such as holiday gifts and occasional meals?

  1. They are fully taxable

  2. They are deductible after tax

  3. They are non-taxable

  4. They are taxable if exceeding a certain threshold

The correct answer is: They are non-taxable

De Minimis fringe benefits such as holiday gifts and occasional meals are considered non-taxable. This means that these types of benefits are so small or infrequent that it would be impractical for employers to account for them, and therefore the IRS does not require them to be reported as taxable income for employees. This rule makes it easier for employers to provide small perks to their employees without the burden of additional tax reporting requirements.

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