It’s party time! Can employer deduct costs for internal networking events?

In 2020, the employer-employee relationship was forever altered. The COVID-19 outbreak disrupted industries, halted travel, and changed the way employees work. Employers have been forced to adapt to a tight employment market and workers’ needs. Some companies have decided to offer remote work opportunities and flexible schedules. With work from home becoming the norm, employers and employees have noticed a significant lack of the office culture that existed before the pandemic. To combat the disconnection between employees, some employers have been hosting internal networking events to allow them to interact with one another. The gatherings have boosted office morale and provided a safe outlet for employees to reconnect with their coworkers.

Hosting internal networking events

If your business is hosting internal networking events or offering employees workplace treats, small prizes, or gifts, there could be tax implications. Under the Internal Revenue Code (IRC), a de minimis fringe benefit is excluded from an employee’s W-2 reportable wages. A de minimis fringe benefit is defined as “property or services, the value of which (after taking into account the frequency with which similar fringes are provided by the employer to the employer’s employees) [is] so small as to make accounting for it unreasonable or administratively impracticable.”