Our condominium association gives out gifts (in monetary form) to the association employees that work in our building. Gifts are made to the board president, who sets up a separate bank account, and then decides how the money given should be split up amongst the various employees. Should the president be withholding taxes from these gifts? Does this arrangement present any legal complications?
According to Lori Wilson, an accountant with the firm of Myers, Brettholtz & Company, P.A. of Fort Myers, “gifts to employees are taxable.” Wilson notes that according to IRS Publication 15-B, a gift given to an employee by an employer is considered a taxable “fringe benefit.”
Publication 15-B defines when a fringe benefit must be treated as taxable income. The value of a fringe benefit must be added to an employee’s pay and is subject to withholding. While certain fringe benefits (such as a holiday ham or fruit basket) might be considered “de minimus” and thus non-taxable, monetary gifts are never considered de minimus.
On the legal side, Attorney Joe Adams of the law firm of Becker & Poliakoff, P.A., Naples/Fort Myers, states that there is no legal prohibition against a voluntary bonus program of this type, and he commonly sees similar arrangements in the associations he represents.
Adams does recommend that the amount of individual owner contributions be kept confidential from the employees. Adams says: “You don’t want to have a single owner giving large sums for employee gifts and creating the expectation, whether intended or not, that this owner should get some ‘extra services’ from association employees in exchange for their generosity.”