Are Employee Gifts Taxable?

Are Employee Gifts Taxable?

Are Employee Gifts Taxable?


As a business owner, giving employees gifts and other fringe benefits is something that you are familiar with. Every year you may like to give holiday bonuses or give a gift to each employee on their birthday. This allows you an opportunity to show your appreciation for your employees and to help build a great company culture. However, your good intentions may backfire if you do not understand the tax implications of gift giving. Depending on the type of gift given, it may be taxable income to your employees. But how do you know if a gift is taxable income or not?

What are De Minimis Fringe Benefits?

Most employee gifts are taxable income, unless they are de minimis fringe benefits. These benefits have a minimal value and occur infrequently. They also are not taxable and a business can deduct these items. A previous IRS ruling specifies that a de minimis benefit should not exceed $100. If the value and frequency cause accounting to be impractical, it is likely the gift it is a de minimis benefit. Examples of de minimis fringe benefits are:

  • Holiday or birthday gifts with a low market value
  • Occasional tickets to sporting events
  • Flowers provided under special circumstances

These types of gifts and/or benefits are so small that there is no need to report them.

Taxable Employee Gifts

Cash and cash equivalents are some of the most convenient gifts to give your employees. Some examples of cash equivalent items are gift cards and gift certificates. You may want to think twice before giving these types of gifts though. These gifts are almost always taxable. For example, giving your employees a gift card to buy a turkey for Thanksgiving becomes taxable income for them. All taxable income is reportable on an employee’s W-2.

Planning ahead and having a good understanding of the tax implications for employee gifts is crucial. Keeping records of taxable employee gifts, you give makes W-2 processing easier. But what if you are unsure about what is or is not a taxable employee gift? The best thing to do is to ask your trusted CPA.

Originally written by Jamie M. Shryock, CPA

Updated and additional content provided by Elizabeth Partlow

Employee Retention Credit

Employee Retention Credit

Employee Retention Credit

Over the last few years, the COVID-19 pandemic did not discriminate against the businesses it has affected. Whether large or small, businesses were forced to reduce their operations. In some cases, they had to shut down completely. Thankfully, in March 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed. The act implemented many relief packages to help American families and businesses. Some of the more well-known programs include the paycheck protection program (PPP) and economic injury disaster (EDIL) loans. However, there were tax credits created to help as well. One of those tax credits is the Employee Retention Credit (ERC).

What is the Employee Retention Credit?

The Employee Retention Credit (ERC) is a fully refundable payroll tax credit. It was designed to encourage employers to keep employees on their payroll during the pandemic. The credit is for qualifying employee wages. Qualified wages include wages and some health expenses paid to employees during eligible periods. Small businesses, with less than 100 employees, can treat all wages paid to employees as qualified wages. However, larger businesses, with more than 100 full-time employees, can not treat all wages paid as qualified.

An employer can claim 50% of the first $10,000 in wages per employee that were paid in 2020. For 2021, they can claim 70% of the first $10,000 in wages per employee for quarters 1-3. In total, a small business can receive up to $26,000 in credit per eligible employee. The ERC is not an income tax credit and does not relate to a business’s profit or loss.

Who Qualifies for the Employee Retention Credit?

To qualify for the ERC, a business needs to meet certain criteria. A business must have had their operations partially or fully suspended due to the government orders regarding the COVID-19 pandemic. Or a business must have experienced a significant decline in gross receipts during the calendar year compared to the same periods in 2019.

Businesses can also qualify for the ERC even if they have received other CARES Act assistance, such as the PPP Loan. However, the credit cannot go towards wages that were claimed in the PPP Loan application.

A business must complete a multi-step process to receive the employee retention credit. This process includes determining if the business qualifies for the credit, as well as calculating qualified wages. The amended payroll tax returns need to be filed. It can be a lengthy and tedious process, but it does not have to be. Our team members are here to assist you!


Contributed by Elizabeth Partlow




Key Performance Indicators

Key Performance Indicators

Key Performance Indicators

Key performance indicators (KPIs) are performance measurements that determine how well a business is achieving its objectives. KPIs evaluate the success of a business and they often differ amongst industries. They help to determine a business’ strategic, financial, and operational achievements. KPIs also provide understanding, at all levels of a business, when it comes to making business decisions. As a small business owner there are many common performance indicators that assist in achieving the business’ goals.

Revenue Growth

Revenue growth KPIs measure how sales increase or decrease over time. Common periods are month-to-month, or from one year to the next. Revenue growth analysis can be broken down into more detail, by customer type. A business can determine the revenue growth rate by dividing the revenue from one period by the revenue from a subsequent period. Then subtracting one, and then multiplying by 100 to determine a percent.

Revenue Growth Rate = ((06-30-22 Revenue – 06-30-21 Revenue) / 06-30-21 Revenue) * 100

If the revenue growth rate is positive, the business is growing. If it is negative than there may be a serious problem.

Gross Profit Margin

Gross Profit Margin KPIs measure the profit a business makes on each dollar of sales before expenses. It depicts how well a business is performing. Profit margins are crucial KPIs for a business. A business’ gross profit margin should increase as the business grows. If the gross profit margin decreases, this can indicate trouble. To calculate the gross profit margin the cost of goods or services sold is divided by the revenue, then multiplied by 100. By monitoring the gross profit margin regularly, it helps to identify trends. In doing this, any major changes are identified and then mitigated if need be.

Accounts Receivable Turnover

The accounts receivable turnover is a KPI that measures how quickly your business collects on outstanding receivable accounts. It essentially tells you how quickly your customers are paying their invoices. Common timeframes for customer payments are 30, 60 or 90 days. Customers paying their invoices on time helps to ensure a steady and stable cash flow. Monitoring this KPI helps to identify any problem areas, such as slow paying customers and inefficient invoicing processes.


There are many key performance indicators that are common amongst small businesses. They help a business achieve its goals and provide insight on the overall health of the business. Our team specializes in developing and implementing KPIs and is here to help!


Contributed by Elizabeth Partlow

8(a) Business Development Program

8(a) Business Development Program

8(a) Business Development Program

As a government contractor, the road to success is not always easy, but is well worth it. The industry offers opportunities for growth to businesses of any size. As a small business though, there are programs to help create an equal playing field with your larger competitors. The Small Business Administration (SBA) has several programs to help small businesses win federal contracts. One, in particular, is the 8(a) Business Development program.

What is the 8(a) Program?

The 8(a) Business Development program creates opportunities for economically and socially disadvantaged business owners. It is a nine-year program, that develops small businesses through training and technical assistance. The program’s assistance strengthens a business’s ability to compete effectively in the federal contracting world. Disadvantaged businesses in the 8(a) program can compete for sole-source contracts. According to the SBA, the government authorizes sole-source contracts to 8(a) participants ranging from $4.5 – $7.5 million, depending on acquisition type.

Eligibility and Certification

The government’s goal is to award 5% of its contracting budget to small, disadvantaged businesses each year. To qualify, a business must meet certain criteria. The SBA states you must:

  • Be a small business
  • Not have previously participated in the 8(a) program
  • Be at least 51% owned and controlled by U.S. citizens who are socially and economically disadvantaged
  • Have a personal net worth of $750 thousand or less, adjusted gross income of $350 thousand or less, and assets totaling $6 million or less
  • Demonstrate good character
  • Demonstrate the potential for success such as having been in business for two years

If you meet these requirements, you can apply for the program.

Compliance Requirements

As a government contractor there are many rules and regulations you must follow to be compliant. One major focus of compliance has to do with your accounting system and financial reporting. Examples of compliance requirements include:

  • Segregating direct costs from indirect costs
  • Excluding unallowable costs
  • Identifying jobs costs per a contract’s requirements

These compliance requirements apply to businesses with the 8(a) certification as well. However, 8(a) businesses must meet more requirements.

For example, during the last 5 years of the program, 8(a) businesses must attain specific percentages of revenue from non-8(a) sources. If they do not meet the amounts for non-8(a) revenue, then they may become ineligible for sole-source 8(a) contracts. Due to this, 8(a) businesses must be able to track and identify the revenue they receive. Also, to remain eligible for the 8(a) program, a business needs to submit an 8(a) annual review. There are many requirements for this annual review, to include providing year-end balance sheet and profit & loss statements, and business tax returns.

Receiving an 8(a) certification can help your small business become successful. Although, the process and the requirements can be tedious. It does not have to be. Our team of experts would love to assist you!


Contributed by Elizabeth Partlow

Benefits of a Virtual CFO

Benefits of a Virtual CFO

Benefits of a Virtual CFO

Gone are the days where large businesses, with what seems like infinite funds, are the only ones needing CFOs. Most businesses, regardless of size, can benefit from the expertise of a CFO. They can guide and steer your business in the right direction. With today’s technological advances, you can even reap the benefits of a CFO in a virtual capacity. You may be thinking to yourself ‘is a virtual CFO even worth it?’ Virtual CFOs provide many benefits a traditional CFO does, at a fraction of the cost.

Cost Savings

Virtual CFOs provide your business with all the great benefits of an in-house CFO. However, you are not liable for the financial burden of hiring a full-time employee. In-house CFO’s expect higher salaries, bonuses, and other amazing benefits; rightfully so. When hiring a virtual CFO, many of these expenses do not exist for your business. You pay for the services you desire, which ultimately reduces your business’ costs.


Businesses are like snowflakes. They may look similar, but no two businesses are the same. Virtual CFOs allow you to tailor the conditions of their services to meet your business’ needs. Currently, you may have the need for a full-time CFO, but six months from now that need may decrease. While a virtual CFO deals with the financial side of your business, you will have more time to focus on what you do best.


CFOs are subject matter experts (SME) responsible for managing business’ financial operations and strategy. With a virtual CFO you get access to a team of experts versus one expert. Having a team working for your business provides a vast amount of knowledge, to meet your business’ needs. The resources a team will provide are something an in-house CFO does not have. Also, a traditional CFO usually has experience working for one or two industries. However, a virtual CFO has experience working with multiple industries.


Virtual CFOs possess skills and expertise to foresee your business’ woes. This allows them to assist in your business’ financial affairs. Providing financial advice in areas like strategic planning, forecasting, and cash flow management to help your business grow. A virtual CFO ultimately can provide a roadmap for growth. This roadmap not only delivers your business’ goals, but also focuses on how to achieve these goals.

There are many benefits of a virtual CFO. They reduce costs, provide flexibility and expertise, and promote growth. Our team specializes in these services and would love to discuss your needs.


Contributed by Elizabeth Partlow