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De Minimis Benefits: IRS Rules and Compliance

Nicole Sithithavorn Blog Benefits, Compliance, Tax

A de minimis benefit is a small, infrequent perk provided by an employer, intended to be so minor that it would be impractical or unreasonable to consider it taxable income. Rather than allowing employers to decide what benefits are de minimis, the IRS has established strict criteria to determine what qualifies.

First, the value of the benefit must be minimal (usually interpreted as under $100), and its occurrence must be rare or unusual.

Cash and cash-equivalent benefits, such as gift cards redeemable for general merchandise, are always considered wages. Even when given as gifts or bonuses, they do not qualify as de minimis benefits. In contrast, certificates for specific, low-value items that are given infrequently and are impractical to account for generally qualify as de minimis.

If the benefit exceeds what can reasonably be considered de minimis, the entire value becomes taxable to the employee. These benefits must be reported on Form W-2 and are subject to income tax withholding, as well as Social Security and Medicare taxes if applicable. Businesses may optionally report these benefits in box 14 of Form W-2.

Exceptions

Special rules apply to tangible personal property awards for employee achievements, such as length-of-service or safety awards. These awards must not be disguised wages, must be given as part of a meaningful presentation and cannot include cash, cash equivalents, vacations, meals, lodging, tickets or securities. Additional conditions and dollar limits apply, which are detailed in IRS Publications 5137 and 535.

An exception also exists for occasional meal money or transportation fare provided to enable an employee to work an extended, unusual schedule. This benefit is not excludable for regularly scheduled hours, even if they include overtime, and the employee must actually work the additional hours.

If a benefit qualifies under these exceptions, it is excluded from wages, and no reporting is required.

For small businesses, the simplified reporting of low-value goods reduces administrative burdens. However, professional advice may be helpful to ensure compliance with IRS rules and avoid exceeding threshold amounts.

Pro Tip: It’s Q4 – GO TIME

Nicole Sithithavorn Blog, Pro Tip Budget forecasting, planning, Strategy

It may feel like summer, but it’s actually Q4. Yes, I know that is not technically until Oct 1, but the reality is that if you want to be well positioned for Q1 2026, the time to act is now. What does that mean for us and our clients?

– Making decisions about strategic pathway

– Forecasting and budgeting related to those decisions and the options within them

– Planning for infrastructure that may need to evolve related to them

– Working with management teams to get buy-in on our path

– Empowering people to make it happen through accountability

What do you want from 2026? It’s Q4, that means GO TIME!

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AI Is Here for Your HR Department

Nicole Sithithavorn Blog AI, HR

If your human resources department reviews hundreds of applications, facilitates employee orientation and attends job fairs, chances are that it is already using artificial intelligence in recruitment and selection. Companies have even set up chatbots on career portals to answer commonly asked candidate questions. This allows staff members to focus on interviews, background checks and preemployment assessments.

Staff are also freed up when AI drives employee onboarding with automated paperwork and the delivery of training modules personalized to the new hire.

More work for AI in hiring

Generative AI provides virtual assistants. A key question for many companies concerns how to interact with this virtual help. One way to start may be with AI-generated HR content, especially documentation. Another path may be to see whether chatbots can predict which channels might attract the right candidates for specific roles. It is possible that AI will soon be able to predict a particular candidate’s success within a company.

While many companies are interested in exploring these AI uses for their potential cost savings, it’s important to remember the potential drawbacks. For example, questions have been raised about biases inherent in AI-based selection materials. A key challenge for HR then is how to limit or redirect biases in AI-generated assistance.

Other HR functions and AI

AI may soon be used to refine remote work experiences. In addition to optimizing virtual collaboration, AI may be able to support hybrid and remote workers by analyzing individual work patterns, preferences and productivity levels. From these analyses, AI will provide personalized recommendations of optimal work hours and break times, helping employees tailor their work routines for efficiency. These analyses may promote employee well-being.

AI can help reduce benefits administration, including open enrollment and eligibility verification and tracking, by creating side-by-side comparisons of benefits plans (from health insurance to employee assistance programs) to help HR decide the best combination of coverage and affordability based on employee data and by analyzing utilization rates and replacing programs with low enrollment.

AI’s role in training and development will be a huge benefit to HR.

AI excels at creating presentation slides and handouts, designing scenarios for role-playing exercises and summarizing training sessions for employees who missed a session. AI can also be used to refine training materials, writing clearer, more accessible explanations and expositions.
AI can write multiple-choice, true/false and fill-in-the-blank quiz questions based on your training materials.
AI is terrific at data analysis, calculating your training cost per employee or course completion rate. AI also can utilize its natural language capabilities to help HR analyze open-ended responses or provide interactive progressive queries based on answers. HR can use this data to provide a deeper understanding of employee sentiments and concerns.
AI can generate online training sessions for someone who missed the in-person sessions, allowing the employee to stay current without HR having to redeliver content for just one person.

AI can help HR comply with federal, state and local laws by conducting background checks, displaying required posters/materials, staying on top of reporting deadlines and monitoring changes in laws.

AI can be an important tool in succession planning. It can:

Identify future staffing needs by seeing what gaps exist now and predicting what gaps will arise
Assess employees’ skills, preferences and career aspirations so that they can be prepared, using AI-generated personalized trainings, to take on new roles within your company
Tailor professional development engagement and skills acquisition

HR can enhance decision-making with AI’s data, using AI to uncover insights, understand trends, monitor and enhance employee productivity and make informed choices that align with company goals.

AI chatbots will soon be able to help with the routine activities that are often employees’ most frequent use of HR, such as downloading pay slips or confirming paid time off balances. This may lead to a better sense of engagement and support. Employees could also use AI chatbots to find the optimal time for PTO based on overall staffing and the employee’s PTO balance.

AI will be able to significantly enhance efficiency and accuracy in HR. But human oversight and expertise are still crucial. AI should be used as a tool to support and augment HR professionals’ work, not replace their judgment and decision-making capabilities. Nonetheless, it is clear that AI is on the path to playing a pivotal role in the HR landscape. The future of HR is not about managing people — it’s about leveraging intelligent systems to make decisions that propel your company forward.

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Even Small Businesses Need Cyber Liability Insurance

Nicole Sithithavorn Blog Cyber, Insurance, risk management

Cyber liability insurance protects your business from any financial losses if it suffers a data breach, ransomware attack or any other type of cyberattack.

This type of insurance has only become more important as a greater number of small businesses store customer data, expansion plans, revenue reports and other valuable key documents online. It’s also important for businesses that conduct transactions online.

If you’re wondering whether your business needs cyber liability insurance, ask yourself whether your business does any business online. If the answer is yes, then you should invest in this insurance.

What does cyber liability insurance cover?

The main goal of cyber liability insurance is to offer your small business a financial lifeline if it suffers an online attack from hackers or criminals.

Ransomware attacks

If a hacker disables your company’s computers and won’t let you log back on unless you pay a ransom, cyber liability coverage might pay out to help you cover the cost of the ransom and regain control of your computers. It might also pay out to cover any loss of business you might have experienced when you were frozen out of your online systems.

And if you need to upgrade your online security following an attack? Your cyber liability insurance policy will help cover those expenses too.

Data breaches

If your business suffers a data breach in which the names, passwords, Social Security numbers or other personal information of your clients are exposed, your cyber liability policy will help cover any legal fees you face from customers who sue you and will help cover any business losses the data breach causes.

If you must spend money to notify your customers that their data was exposed, your cyber liability policy will help cover those costs too.

Investigations

Cyber liability policies might also cover the costs of any investigations you launch to discover the source of a cyberattack and any expenses you incur to recover stolen data.

Your small business might have to hire a public relations firm to help rebuild its brand after a cyberattack. If you have a cyber liability policy, it can help cover some of these PR fees.

How much does cyber liability insurance cost?

How much your small business pays for cyber liability insurance will depend on several factors, including the types of coverage that your policy provides.

Insureon, a digital agency for small-business insurance, estimates that the average cost of this insurance for small businesses is $145 per month, or about $1,740 annually.

That might seem like just one more expense that you must pay for when running a small business. But think about how expensive a data breach or ransomware attack could be. That investment in cyber insurance might seem like a bargain.

Keys to Building an Effective Finance Team

Nicole Sithithavorn Blog Finance, Staffing

Building an effective Finance team is hard for many businesses, regardless of size. With a few simple principles it does not have to be. Thinking of your Finance team as an ever evolving group that must work with the needs of your business and its evolution is key.

Tips for building an effective finance team:

1. Let the process determine the need.

In Finance we need enough staff to allow for effective internal controls and redundancy. Often times companies end up with overly large finance teams when they allow the current team to determine what the process will be, rather than building the team around the process.

2. Make sure the team members understand the “why” behind the tasks they are completing.

When Finance team members have only lists of tasks they complete without an understanding of the greater purpose and importance of those tasks then they are not able to identify when something doesn’t make sense or isn’t quite right. We want people on our teams to be able to tell us how a process could be done better. We want them to know enough to allow them to identify why something is not working as it was intended to.

3. Leave your ego at the door.

Good leadership is not ego driven. If you want a good team you need to be able to empower them. The best way to empower your team is to ask them questions and listen to their responses. Make sure they know that their ideas and feedback are not just valuable but crucial to the success of the team and the company as a whole.

4. The only constant is change.

Just like every other role in your company, Finance roles will need to evolve with growth. What worked yesterday may not work tomorrow, or may just not be the best way of doing things anymore. Finance should strive to get better, more efficient, more effective, more able to drive the business and its value into the future. A good team is excited and on board with that, a good leader helps them feel that way and see where they can grow and make a difference.

Not sure how effective your Finance team is? Take the time to review their position scopes, their workflows, and how successful their output is to take the first step in determining that.

What the Coldplay Scandal Can Teach Us

Nicole Sithithavorn Blog HR, risk management, Strategy

A video captured on a Jumbotron at Gillette Stadium in Foxborough near Boston during a Coldplay concert highlighted a man embracing a woman, but when both realized they were on the big screen, she covered her face and turned around, while he ducked out of view.

Coldplay lead singer Chris Martin, who had asked the cameras to scan the crowd for his Jumbotron Song, joked on seeing their reaction, “Either they’re having an affair or they’re just very shy.”

It turned out that Andy Byron, the CEO of Astronomer Inc., who is married to someone else, and Astronomer chief people officer Kristin Cabot, also married, were caught canoodling.

Astronomer acted quickly in accepting the CEO’s resignation to quash the damage to its reputation and the trust of clients. “Our leaders are expected to set the standard in both conduct and accountability, and recently, that standard was not met,” the company said in a statement. Cabot has been placed on leave.

Lessons learned

This gotcha moment shows how technological advances like AI have made it easier and faster to find just about anyone in a viral video. Commentors have been noting how the internet has gone from being a place of interaction to a gigantic surveillance system.

The New York Times reported that it’s a stark reminder of how quickly scandals can spread thanks to social media and that cameras surround people all the time. The video was posted by a concertgoer with a modest TikTok following, but has had more than 100 million views, showing the power of the app’s algorithm. It became an instant meme that many are calling Coldplaygate.

The lesson here is that even a privately held company is up for public scrutiny. Just because Wall Street analysts aren’t studying your every move doesn’t mean your company is invisible.

“We live in a very intrusive world of cameras and digital footprints,” The New York Times quoted Charles Lindsey, an associate professor of marketing at the University of Buffalo School of Management, as saying. “It can take 10 to 20 years to build a reputation, and you can lose it in a moment.”

Privacy laws are complex. The couple likely did not have a legal expectation of privacy at a public venue — no one was sneaking up to their window. But as others have noted, the ethics of situations like this are murky.

What about fraternizing?

Aside from the embarrassment, there’s the HR problem of what happens when employee relationships move beyond the office. Many businesses have fraternizing policies that apply to everyone from mailroom staff to the executive suite. Relationships that cloud business judgment can affect everyone. Especially dangerous are those between supervisors and staff members they manage, which can open the company to a wide range of business and legal issues, including sexual harassment charges.

Even when employees don’t supervise each other, companies may be concerned that they are spending more time in the office socializing than taking care of business. Of course, brief and casual conversations should be fine, along with lunches together. Your best bet is to work with HR professionals for guidance on a fraternizing policy and even for specific situations. Sometimes, an employee transfer — without loss of rank or wages — can solve a problem.

It’s essential you get qualified advice, as an overly strict policy can seriously impact employee morale, become difficult to enforce and even lead to legal problems.

Bottom line

We’re all laughing at the memes now, but keep in mind the serious lessons: Behavior can have serious consequences, and good HR management is essential.

Pro Tip: Finance Team Effectiveness

Nicole Sithithavorn Blog, Pro Tip Staffing

An effective Finance team is essential for any business, regardless of size. Sometimes that team is full of on staff people, other times it can be accomplished by using outsourced solutions. Without one though, a business is likely not reaching the lowest bar of finance team performance: accurate and timely financial reporting. This bar must be reached before any further evolution can happen, to then allow for:

– Strategic improvement in financial reporting

– Data driven decision making

– Readiness for the right deal when it comes along

Need to level up performance? Level up your Finance team!

Want some help learning how to do this? Happy to chat, or check out our recent LinkedIn post on the topic.

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At-Risk Rules Can Limit Tax Deductions

Nicole Sithithavorn Blog Tax

The at-risk limitations are the result of Congress’ concern that taxpayers were deducting losses from tax-sheltering activities far in excess of their economic amount at risk in the activities. The thrust of the rules is that you can deduct losses only to the extent you bear a real economic risk of loss.

Amounts considered at risk

You are considered at risk for:

The money and adjusted basis of property you contribute to an activity
Amounts you borrow for use in the activity, if you’re personally liable for repayment, or property you pledge (other than property used in the activity) as security for amounts borrowed

For example, if you borrow money to buy rental property, you’re considered at risk if you’re personally liable for repayment of that loan. You’re also at risk if amounts borrowed are secured by property (i.e., pledged property) other than property used in the activity. In this case, the amount considered at risk is the net fair market value of your interest in the pledged property. However, no property is considered as security if it’s directly or indirectly financed by debt that’s secured by property you contributed to the activity.

Since the IRS often scrutinizes real estate loss deductions, it’s important to have a professional appraiser document the fair market value of property involved in these transactions.

Further, even if (1) you’re personally liable for the repayment of an amount you have borrowed or (2) you secure a borrowed amount with property other than property used in the activity, you aren’t considered at risk if you borrowed the money from a person having an interest in the activity or from someone related to a person (other than you) having an interest in the activity.

Amounts not considered at risk

You aren’t considered at risk for amounts protected against loss through nonrecourse financing, guarantees, stop-loss agreements or other similar arrangements. Nonrecourse financing is financing for which you aren’t personally liable. If you borrow money to contribute to an activity and the lender’s only recourse is to take your interest in the activity or the property used in the activity, the loan is a nonrecourse loan.

Additionally, any capital you have contributed to an activity isn’t at risk if you’re protected against economic loss by an agreement or arrangement for compensation or reimbursement.

Example: George and Ann own a building, which they rent to a group of dentists. The rental income is used to pay the mortgage on the building. George is personally liable for the mortgage; however, he separately obtained insurance to compensate him for any payments he must actually make because of his personal liability. George is considered at risk only to the extent of the uninsured portion of the personal liability to which he is exposed. He can include in the amount he has at risk the amount of any premium that he paid from his personal assets for the insurance.

Reductions of amounts at risk

The amount you have at risk in any activity is reduced by losses allowed in previous years under the at-risk rules. It may also be reduced because of certain distributions received. If the amount you have at risk is reduced below zero, your previously allowed losses are subject to recapture, thus resulting in income to you.

As you can see, calculating the amount you have at risk for an activity, which in turn affects the amount you can deduct on your tax return, is complicated. It’s best to engage tax professionals to help document your at-risk amounts in case of a future IRS audit.

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How to Survive Tariff Turbulence

Nicole Sithithavorn Blog Contingency Planning, Forecasting, planning, Scenario Forecasting, tariffs

Tariffs are a long-standing tool of economic policy, but that doesn’t make them easy for companies to navigate. Recently, tariffs have been imposed, lifted and then revised, making it difficult for companies to predict short-term costs. U.S. businesses may face different rates depending on whether they’re importing finished goods or components for domestic assembly. And finally, the latest wave of tariffs has arrived just as supply chains had begun to stabilize following years of pandemic-related disruption.

How to plan

The global reach of modern tariffs, combined with ever-changing rules about what’s included and at what rate, has shaken confidence in the systems businesses rely on. One thing is certain: Higher prices are an inevitable result of tariffs. That leaves companies with a difficult set of choices: Raise prices, absorb the added cost or try some mix of both.

In response, companies are testing a range of pricing strategies. Some fold tariff costs into their base price. Others list them as a separate surcharge. A few hold pre-tariff sales to stimulate demand. Each approach has trade-offs; what matters most is acting with intention.

Rather than wait for certainty, some businesses are building short- and medium-term strategies based on how the situation might evolve. Scenario planning includes possibilities such as:

There are no new tariffs.
Tariffs increase.
Tariffs are eliminated or reduced.
Exemptions are extended.
Pauses are lifted.
Retaliatory tariffs (from other countries) are imposed.

If your company opts to plan this way, be sure that each scenario accounts for how suppliers, lenders and customers might respond. For example, banks may tighten underwriting standards in response to tariff volatility. Consumers, especially those in discretionary markets, may delay spending when tariffs and recession fears coincide.

It’s also helpful to build in transparency. Early, clear communication about possible pricing changes and the potential timing of those changes builds trust with both B2B and B2C customers. Some may still choose to cut back or walk away, but others will appreciate your company’s respect for how they too need to plan.

Your company is best likely to weather tariff turbulence if it plans ahead, acts deliberately and stays nimble as conditions change. As always, consult tax and financial professionals before making structural changes to your business.

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Supply Chains and Logistics

Nicole Sithithavorn Blog Inventory, Manufacturing, Strategy, Supply Chain

Supply chain management involves controlling the upstream and downstream flow of materials and finances — from sourcing to manufacturing and distributing to retailing and finally to the hands of the consumer.

It encompasses planning, designing, purchasing, production, logistics and quality. Supply chains work through collaborations and partnerships to gain efficiencies, such as just-in-time manufacturing systems that operate very small inventory reserves.

The proper monitoring of supply lines is critical. Many companies touch a product before it reaches the customer. Companies in a supply chain exchange information about fluctuations in availability, timing, shipping and seasonal variability.

Accountants can help in identifying costs and value add to processes across organizational boundaries and to support different types of relationships between companies. The cluster of businesses that make up the supply chain need to be appropriately configured and networked to a central database, sharing forecasting systems with real-time updates.

Efficient supply chain management ensures that a company maintains a constant flow of fresh products at an optimal level that matches customer demand while keeping inventory levels lower in order to minimize carrying costs.

In running a business, you’ll be dealing with large volumes of goods, which translates to high carrying costs, as you have to ensure that your products are stored well and in good condition to reach your retailers.

You want to be able to spot slow-moving shipments and track warehouse management functions, especially if you have stock in different locations. You want all relevant parties to have access to timely information — real-time stock updates to minimize the risk of overselling.

Here’s where accounting comes in handy: It’s important for logistics to cut excess costs and to deliver products faster and cheaper by controlling internal inventories, production, distribution and inventories. Accountants play increasingly vital roles in strategies, as well as planning and execution of supply chain management.

An accountant serving on design and implementation teams will provide analytical expertise, an economic perspective and an objective mindset to help examine, evaluate and prioritize the opportunities and challenges of the supply chain. Accountants can meet with the team charged with design, development and execution of supply chain planning. What can they bring to the table?

Financial analysis — Prepare a financial analysis of the costs and benefits of supply chain management.
Performance benchmarks — Create performance benchmarks, milestones, and key performance indicators, or KPIs, and measure to support the management of the supply chain.
Evaluation — Provide an economical and nonfinancial evaluation of alternative improvement opportunities to facilitate the management of supply chain priorities.
Database and technology — Enable supply chain transactions by participating in identifying and implementing new database and information technology.
Identifying efficiencies — Play a vital role in redesign processes to remove waste and reduce or increase the flexibility and responsiveness of financial transactions across the supply chain.
Problem solving — Collaborate with finance and operations professionals in partnering organizations to find creative ways to solve logistics and support problems.
Decision-making — Provide analytical support to supply chain management teams — estimating, for example.
Reporting — Create management reports and evaluation tools so that you meet objectives and performance improvements.
Data integrity — Ensure the integrity of internal control procedures, proprietary technologies and processes

Accountants work to facilitate long-term sustainability of supply chains and add value to their management by creating competitive advantage through improvements.

By keeping an eye on the total costs of supply chains, you’ll be working to maximize efficiency when goods are moving from original suppliers to end users. By helping to control the flow of materials — and finances — you’ll ultimately get better business results.