Considering how quickly employers needed to respond to the issuance of work-from-home orders at the start of pandemic, Morgan said, it’s “not surprising” that the tax treatment of a particular benefit wasn’t at the top of anyone’s mind at the time. But now that work-from-home arrangements and other workforce changes have become routine, employers may want to consider whether these new benefits are a normal business expense or a “fringe” benefit that could create tax liabilities for both the employer and the employee.
“Small rewards for good performance, such as an employer-branded hat or a similar inexpensive item, will be nontaxable,” she said. “If that reward is payable in the form of a $5 Starbucks gift card, however, it will be taxable,” even if the monetary value of those two gifts is the same.