Holiday Gifts and Parties

Veterinary Hospital Managers Association

PO Box 2280 Alachua, FL 32616-2280 [email protected] • www.vhma.org

The official newsletter of the Veterinary Hospital Managers Association

December 2012

Holiday Gifts and Parties Matt S. Nolan Marsha L. Heinke, CPA, Inc. (Grafton, OH) [email protected]

Webinar January 30: Disaster Preparation for Veterinary Hospitals Meeting and Conferences Management Exchange: February 8-10, San Diego, CA Annual Meeting and Conference: September 26-29, Charlotte, NC

What Insights Await YOU at the VHMA Management Exchange? VHMA

Business Alliance Partners

Topics Covered February 8-10, 2013 Catamaran Resort Hotel & Spa San Diego, CA Every professional working in veterinary practice management has a unique perspective to share, an invaluable piece of advice, and a strategy for performing his or her job better. The Veterinary Hospital Managers Association’s “Insight Through Interaction” Management Exchange brings these personal experiences to life through a series of dynamic, peer-led presentations. Organized panel discussions, workshops, and group activities strengthen friendships and maximize the learning experience. The setting is informal, and the educational impact is outstanding.

Why don’t you join us this year? To register, visit www.vhma.org 4 • VHMA • December 2012

or all those not named Ebenezer Scrooge, the holiday season represents an opportunity to show appreciation to those who give so much to us throughout the year. Disclaimer: this article will not include any stories about ghosts of the past, present, or future, but it will help you better understand what holiday gifts need to be added to employee wages in the season of giving. The good news is that not all employee gifts are subject to tax. For example, if a clinic owner gives an employee a turkey, ham, bottle of wine, or other item of nominal value, it is not subject to tax. This is supported by Section 132(a)(4) of the IRS Code that provides gross income does not include any fringe benefit which qualifies as a de minimis fringe. Section 132(e)(1) defines a de minimis fringe as “any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer’s employees) so small as to make accounting for it unreasonable or administratively impractical.” Translation: it takes an inordinate amount of time to attach monetary value to a turkey but not to a gift card. Also important is that the turkey is not received frequently or regularly. If you start giving a turkey (or any other de minimis gift) on a regular basis, it will become taxable as wages. Furthermore, Income Tax Regulation 1.132-6(e)(1) states that traditional holiday gifts of property (not cash) with a low fair market value are excludable from an employee’s gross income. As a result, by giving an employee a gift that qualifies as a de minimis fringe, practices and employees can avoid paying tax. The IRS does not explicitly provide a dollar value that gifts must remain under in order to qualify as de minimis. Talk to your accountant if you’re skeptical about a gift qualifying as de minimis fringe.

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Conversely, cash-equivalent gifts are taxable under Code 132(a)(4). One example of a taxable cash-equivalent gift is a gift certificate. Code 3121(a) defines the term “wages” for FICA purposes as all compensation for employment, including the cash value of compensation (including non-qualified benefits) paid in any medium other than cash, with certain specific exceptions. Because cash and cash equivalent fringe benefits like gift certificates have a readily ascertainable value, they do not constitute de minimis fringe because these items are not unreasonable or administratively impractical to account for. (Continued on page 3) VHMA • PO Box 2280, Alachua, FL 32616 • 518-433-8911 • [email protected] • www.vhma.org

Welcome New Members Stephen A. Anderson, DVM Kerry Balding Barbara Bradford Virginia G. Brown, DVM Kirsten Burner, MBA Kelly Burns, RVT Shannon Cabell Melissa A. Callahan, B.S. Ginger Carden Angela Sophia Cariotis Ish Kanwal Chowdhary Christie Anne Clary Katherine Clifford Sarah Clyde Kynta Eagle Cassandra Masako Evans, RAHT Marlene Deborah Gallon, DVM Dawn M. Gregory, LVT Carol L. Hazen John Kelly Carlene R. Krogh, CVT Steven Mathew Latimer, DVM Cathy Lawler Jill Therese Luna Linda C. Madden, CVT, BA Kristine Lauren McCormick Michele Darcy Meade, SPHR Lorraine Monroe Allyson Naplin Ivette Nessim, DVM Elissa Ann Petruzziello Tiffany Richey, MBA Karen E. Rohde Sonya Russell Christina Sims Jackie Stryker Amanda Sweezea Deborah Verwers Elizabeth Ashley Wagner Vicky Wall John Oliver Wallace, LVT Jessica M. Zambotti

President’s Message

Focused on The Future

A

s we prepare for the new year, we look back to assess what we accomplished in the last 12 months. With the support of our members, we have made some great strides in 2012 that I think we can all be proud of. • VHMA received industry-wide recognition for its examination of the issues that challenge practice management professionals. • VHMA facilitated networking to ensure members are well versed in the industry’s hottest topics, and learned from shared knowledge and experiences. • VHMA provided valuable, practical, transferable skills through educational programming. • VHMA continued promoting high standards in profession through the certification of managers.

services, expand offerings through new technology and invest in the associations future. As always, feedback and input from the membership has always been a cornerstone for evaluation and direction in all that we do and offer. I encourage each and every member to participate in member assessment surveys and reach out to the VHMA staff to help shape the association’s future. VHMA is looking forward to a productive year ahead. I look forward to your participation and involvement in 2013. Remember to stimulate the mind and enhance your environment! Tom MacDonald, CVPM

These efforts resulted in our highest membership ever with a support of 2,042 members. Members are now more engaged in association activites and have re-energized the association with an excitement about the future of the profession. With a refocused stratgic plan, 2013 promises to offer more as we move to improve value-based programs and

The Practice Pulse is the official publication of the Veterinary Hospital Managers Association (VHMA). All rights reserved. No part of this document may be reproduced in any form without the permission of VHMA. Opinons expressed in articles and editorials of this newsletter are those of the author and not of VHMA. Comments can be directed to Christine Quinn Shupe, CAE, executive director, at [email protected].

LEGAL MATTERS

Holiday Gifts and Parties

Question:

The IRS points to Income Tax Regulation 1.132-6(c), which provides that except for special rules that apply to occasional meal money, the provision of any cash fringe benefit is never excludable as a de minimis fringe benefit. So while it might be easier or more convenient to give an employee a gift certificate than a purchased item (of “nominal” value), be aware of the tax consequences.

We are trying to get employee accounts receivable under control. Are there any issues with implementing a mandatory monthly payment on the account and having the amount automatically deducted from the employee’s paycheck? We are discussing making the minimum a percentage of the balance and proceeding with the payroll deduction if a voluntary payment has not been made.

Legal Advice:

“The key element to your plan is to simply ensure that you have the consent of the employee to the implementation of the plan; given that the plan was not in place with the receivable accrued, it would be an arbitrary change to the engagement agreement if the plan were to be merely imposed by management. For the future, you can merely make a policy change to let all employees know of the new plan which then becomes a part of their engagement. In many jurisdictions, its unlawful to set-off wages against an account receivable; thus, getting the consent of the employee is critical.” Douglas C. Jack, Esq. Posted 09/17/2012. Please note the date of this post. The law changes frequently and as a result this may not reflect the current state of the law.

(Continued from page 1)

What’s more, Income Tax Regulation 1.132-6(c) demonstrates that cash is not excludable as a de minimis fringe benefit even when the property or service acquired (if provided in kind) would be excludable as a de minimis fringe benefit. For example, if you give each employee at your practice $40 with the express intent that they buy a turkey for the holidays, it is taxable to the employee. However, had you bought turkeys for all of the employees and given them out, the turkeys would not be taxable as income to the employees. Most importantly, if one is ever in doubt, be sure to discuss the proper treatment of non-cash staff gifts with your accountant. Another way to celebrate the holidays at work is a staff party. The cost of staff parties is fully deductible to the business and nontaxable to employees and their families as de minimis fringe, so long as such events are infrequent and given to promote employee health, goodwill, contentment, or efficiency. This is in contrast to business meals and entertainment costs which are generally only 50% deductible to the practice. Meal and entertainment expenses incurred for social or recreational purposes primarily for the benefit of employees are 100% deductible for the clinic. In summary, if a business gives an employee a turkey, ham, or other item of nominal value during the holidays, do not include the value of the gift in wages. However, if an employee receives cash, a gift certificate, gift coupon, or a similar item that can be easily exchanged for cash (or if the gift is more than nominal in value) include the value of that gift as wages regardless of the amount received. Also, holiday parties are fully deductible business expenses. Finally, if one ever has any doubt as to the tax consequences of an employee gift, consult your accountant. You may not feel any less like Scrooge, but at least you’ll have the law behind you!

VHMA Legal Matters is a collection of legal advice posts that relate to common cases or situations that many practice managers encounter daily. Advice presented here is not intended to replace the need for your own attorney, but simply to help provide general advice as guidance. VHMA does not accept liability due to errors or omissions. VHMA Legal Matters is free to VHMA members - scroll through our current posts or submit your own question.

Past newsletter articles are available on the VHMA Web site: www.vhma.org. 2 • VHMA • December 2012

VHMA • December 2012 • 3

Welcome New Members Stephen A. Anderson, DVM Kerry Balding Barbara Bradford Virginia G. Brown, DVM Kirsten Burner, MBA Kelly Burns, RVT Shannon Cabell Melissa A. Callahan, B.S. Ginger Carden Angela Sophia Cariotis Ish Kanwal Chowdhary Christie Anne Clary Katherine Clifford Sarah Clyde Kynta Eagle Cassandra Masako Evans, RAHT Marlene Deborah Gallon, DVM Dawn M. Gregory, LVT Carol L. Hazen John Kelly Carlene R. Krogh, CVT Steven Mathew Latimer, DVM Cathy Lawler Jill Therese Luna Linda C. Madden, CVT, BA Kristine Lauren McCormick Michele Darcy Meade, SPHR Lorraine Monroe Allyson Naplin Ivette Nessim, DVM Elissa Ann Petruzziello Tiffany Richey, MBA Karen E. Rohde Sonya Russell Christina Sims Jackie Stryker Amanda Sweezea Deborah Verwers Elizabeth Ashley Wagner Vicky Wall John Oliver Wallace, LVT Jessica M. Zambotti

President’s Message

Focused on The Future

A

s we prepare for the new year, we look back to assess what we accomplished in the last 12 months. With the support of our members, we have made some great strides in 2012 that I think we can all be proud of. • VHMA received industry-wide recognition for its examination of the issues that challenge practice management professionals. • VHMA facilitated networking to ensure members are well versed in the industry’s hottest topics, and learned from shared knowledge and experiences. • VHMA provided valuable, practical, transferable skills through educational programming. • VHMA continued promoting high standards in profession through the certification of managers.

services, expand offerings through new technology and invest in the associations future. As always, feedback and input from the membership has always been a cornerstone for evaluation and direction in all that we do and offer. I encourage each and every member to participate in member assessment surveys and reach out to the VHMA staff to help shape the association’s future. VHMA is looking forward to a productive year ahead. I look forward to your participation and involvement in 2013. Remember to stimulate the mind and enhance your environment! Tom MacDonald, CVPM

These efforts resulted in our highest membership ever with a support of 2,042 members. Members are now more engaged in association activites and have re-energized the association with an excitement about the future of the profession. With a refocused stratgic plan, 2013 promises to offer more as we move to improve value-based programs and

The Practice Pulse is the official publication of the Veterinary Hospital Managers Association (VHMA). All rights reserved. No part of this document may be reproduced in any form without the permission of VHMA. Opinons expressed in articles and editorials of this newsletter are those of the author and not of VHMA. Comments can be directed to Christine Quinn Shupe, CAE, executive director, at [email protected].

LEGAL MATTERS

Holiday Gifts and Parties

Question:

The IRS points to Income Tax Regulation 1.132-6(c), which provides that except for special rules that apply to occasional meal money, the provision of any cash fringe benefit is never excludable as a de minimis fringe benefit. So while it might be easier or more convenient to give an employee a gift certificate than a purchased item (of “nominal” value), be aware of the tax consequences.

We are trying to get employee accounts receivable under control. Are there any issues with implementing a mandatory monthly payment on the account and having the amount automatically deducted from the employee’s paycheck? We are discussing making the minimum a percentage of the balance and proceeding with the payroll deduction if a voluntary payment has not been made.

Legal Advice:

“The key element to your plan is to simply ensure that you have the consent of the employee to the implementation of the plan; given that the plan was not in place with the receivable accrued, it would be an arbitrary change to the engagement agreement if the plan were to be merely imposed by management. For the future, you can merely make a policy change to let all employees know of the new plan which then becomes a part of their engagement. In many jurisdictions, its unlawful to set-off wages against an account receivable; thus, getting the consent of the employee is critical.” Douglas C. Jack, Esq. Posted 09/17/2012. Please note the date of this post. The law changes frequently and as a result this may not reflect the current state of the law.

(Continued from page 1)

What’s more, Income Tax Regulation 1.132-6(c) demonstrates that cash is not excludable as a de minimis fringe benefit even when the property or service acquired (if provided in kind) would be excludable as a de minimis fringe benefit. For example, if you give each employee at your practice $40 with the express intent that they buy a turkey for the holidays, it is taxable to the employee. However, had you bought turkeys for all of the employees and given them out, the turkeys would not be taxable as income to the employees. Most importantly, if one is ever in doubt, be sure to discuss the proper treatment of non-cash staff gifts with your accountant. Another way to celebrate the holidays at work is a staff party. The cost of staff parties is fully deductible to the business and nontaxable to employees and their families as de minimis fringe, so long as such events are infrequent and given to promote employee health, goodwill, contentment, or efficiency. This is in contrast to business meals and entertainment costs which are generally only 50% deductible to the practice. Meal and entertainment expenses incurred for social or recreational purposes primarily for the benefit of employees are 100% deductible for the clinic. In summary, if a business gives an employee a turkey, ham, or other item of nominal value during the holidays, do not include the value of the gift in wages. However, if an employee receives cash, a gift certificate, gift coupon, or a similar item that can be easily exchanged for cash (or if the gift is more than nominal in value) include the value of that gift as wages regardless of the amount received. Also, holiday parties are fully deductible business expenses. Finally, if one ever has any doubt as to the tax consequences of an employee gift, consult your accountant. You may not feel any less like Scrooge, but at least you’ll have the law behind you!

VHMA Legal Matters is a collection of legal advice posts that relate to common cases or situations that many practice managers encounter daily. Advice presented here is not intended to replace the need for your own attorney, but simply to help provide general advice as guidance. VHMA does not accept liability due to errors or omissions. VHMA Legal Matters is free to VHMA members - scroll through our current posts or submit your own question.

Past newsletter articles are available on the VHMA Web site: www.vhma.org. 2 • VHMA • December 2012

VHMA • December 2012 • 3

Veterinary Hospital Managers Association

PO Box 2280 Alachua, FL 32616-2280 [email protected] • www.vhma.org

The official newsletter of the Veterinary Hospital Managers Association

December 2012

Holiday Gifts and Parties Matt S. Nolan Marsha L. Heinke, CPA, Inc. (Grafton, OH) [email protected]

Webinar January 30: Disaster Preparation for Veterinary Hospitals Meeting and Conferences Management Exchange: February 8-10, San Diego, CA Annual Meeting and Conference: September 26-29, Charlotte, NC

What Insights Await YOU at the VHMA Management Exchange? VHMA

Business Alliance Partners

Topics Covered February 8-10, 2013 Catamaran Resort Hotel & Spa San Diego, CA Every professional working in veterinary practice management has a unique perspective to share, an invaluable piece of advice, and a strategy for performing his or her job better. The Veterinary Hospital Managers Association’s “Insight Through Interaction” Management Exchange brings these personal experiences to life through a series of dynamic, peer-led presentations. Organized panel discussions, workshops, and group activities strengthen friendships and maximize the learning experience. The setting is informal, and the educational impact is outstanding.

Why don’t you join us this year? To register, visit www.vhma.org 4 • VHMA • December 2012

or all those not named Ebenezer Scrooge, the holiday season represents an opportunity to show appreciation to those who give so much to us throughout the year. Disclaimer: this article will not include any stories about ghosts of the past, present, or future, but it will help you better understand what holiday gifts need to be added to employee wages in the season of giving. The good news is that not all employee gifts are subject to tax. For example, if a clinic owner gives an employee a turkey, ham, bottle of wine, or other item of nominal value, it is not subject to tax. This is supported by Section 132(a)(4) of the IRS Code that provides gross income does not include any fringe benefit which qualifies as a de minimis fringe. Section 132(e)(1) defines a de minimis fringe as “any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer’s employees) so small as to make accounting for it unreasonable or administratively impractical.” Translation: it takes an inordinate amount of time to attach monetary value to a turkey but not to a gift card. Also important is that the turkey is not received frequently or regularly. If you start giving a turkey (or any other de minimis gift) on a regular basis, it will become taxable as wages. Furthermore, Income Tax Regulation 1.132-6(e)(1) states that traditional holiday gifts of property (not cash) with a low fair market value are excludable from an employee’s gross income. As a result, by giving an employee a gift that qualifies as a de minimis fringe, practices and employees can avoid paying tax. The IRS does not explicitly provide a dollar value that gifts must remain under in order to qualify as de minimis. Talk to your accountant if you’re skeptical about a gift qualifying as de minimis fringe.

r
*nnovative ways to improve client communications r
4USBUFHJFT
GPS
SFEVDJOH
XPSLQMBDF
DPOóJDU r
0QQPTJOH
QFSTQFDUJWFT
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UPQJDT r
*NQMFNFOUBUJPO
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FYDIBOHFT
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TP
NVDI
NPSF

5IJT
QSPHSBN
PíFST

$POUJOVJOH
&EVDBUJPO
)PVST

F

®

Conversely, cash-equivalent gifts are taxable under Code 132(a)(4). One example of a taxable cash-equivalent gift is a gift certificate. Code 3121(a) defines the term “wages” for FICA purposes as all compensation for employment, including the cash value of compensation (including non-qualified benefits) paid in any medium other than cash, with certain specific exceptions. Because cash and cash equivalent fringe benefits like gift certificates have a readily ascertainable value, they do not constitute de minimis fringe because these items are not unreasonable or administratively impractical to account for. (Continued on page 3) VHMA • PO Box 2280, Alachua, FL 32616 • 518-433-8911 • [email protected] • www.vhma.org