Condo Media - December 2022 - 16

Asked & Answered
Cash Gifts
Rewarding Association
Managers in Compliance
with Tax Laws
Our board wants to thank
our association manager
this holiday season with
a cash gift. What's the
best way to handle that?
Very carefully. That advice comes from Kenneth
Bloom, CPA, a partner in Bloom Cohen Hayes LLC,
who says he gets this question regularly from condominium
association clients - and most don't like his
answer: " You can call it a gift, " he says, " but as far as
the IRS is concerned, it's compensation, and it has to
be treated as such. "
The defi ning question for the IRS, Bloom explains,
is this: " If not for the employer-employee relationship,
would this person be on your annual gift
list? " The honest answer, he says, is no. " It is very
diffi cult to demonstrate the 'donative intent' the tax
laws require, " he notes, and equally diffi cult to fi nd
workable paths around this IRS obstacle.
Giving a non-cash gift won't work, Bloom says,
because they are subject to the same tax rules as
cash gifts. Turkeys, hams, and inexpensive gifts
classifi ed as " de minimis " (of nominal value) and
" distributed as good will " aren't taxable, Bloom
explains. But anything that can be converted to cash
(gift certifi cates or season tickets for the Red Sox,
for example) or that is worth more than $100 must
be treated as compensation.
Some boards try to get around the compensation
requirement by simply writing a check to the manager
16 CONDOMEDIA December 2022
that isn't run through the payroll. That may escape
IRS notice (or not), Bloom says, " but it still violates
the tax law. " At a minimum, he says, the board should
give the employee receiving this gift a 1099 form -
reporting compensation paid to independent
contractors. That's not really appropriate, he says,
because a staff member " can't be both a full-time employee
and an independent contractor. " This arrangement
also doesn't work well for employees, he notes,
because the additional income would be subject not
only to the applicable federal and state income tax,
but also to the 15.3 percent self-employment tax -
a double-taxation " gift " that few will welcome.
What if owners give the manager money individually
or collect money from other residents as a group gift?
" That happens, " Bloom acknowledges, " and I'm not
sure there's anything the board can do to stop it. "
But there are potential problems, he says. For one:
It is hard to track owners' contributions and ensure
that all the money collected " is disbursed properly " as
gifts for the manager and other employees. Favoritism
is another possible concern, Bloom says. " If the board
hears about this and doesn't discourage it, will this
encourage staff members to give preferential treatment
to owners from whom they receive gifts? "

Condo Media - December 2022

Table of Contents for the Digital Edition of Condo Media - December 2022

Contents
Condo Media - December 2022 - Contents
Condo Media - December 2022 - Cover1
Condo Media - December 2022 - Cover2
Condo Media - December 2022 - Contents
Condo Media - December 2022 - 2
Condo Media - December 2022 - 3
Condo Media - December 2022 - 4
Condo Media - December 2022 - 5
Condo Media - December 2022 - 6
Condo Media - December 2022 - 7
Condo Media - December 2022 - 8
Condo Media - December 2022 - 9
Condo Media - December 2022 - 10
Condo Media - December 2022 - 11
Condo Media - December 2022 - 12
Condo Media - December 2022 - 13
Condo Media - December 2022 - 14
Condo Media - December 2022 - 15
Condo Media - December 2022 - 16
Condo Media - December 2022 - 17
Condo Media - December 2022 - 18
Condo Media - December 2022 - 19
Condo Media - December 2022 - 20
Condo Media - December 2022 - 21
Condo Media - December 2022 - 22
Condo Media - December 2022 - 23
Condo Media - December 2022 - 24
Condo Media - December 2022 - 25
Condo Media - December 2022 - 26
Condo Media - December 2022 - 27
Condo Media - December 2022 - 28
Condo Media - December 2022 - 29
Condo Media - December 2022 - 30
Condo Media - December 2022 - 31
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Condo Media - December 2022 - 33
Condo Media - December 2022 - 34
Condo Media - December 2022 - 35
Condo Media - December 2022 - 36
Condo Media - December 2022 - 37
Condo Media - December 2022 - 38
Condo Media - December 2022 - 39
Condo Media - December 2022 - 40
Condo Media - December 2022 - 41
Condo Media - December 2022 - 42
Condo Media - December 2022 - 43
Condo Media - December 2022 - 44
Condo Media - December 2022 - 45
Condo Media - December 2022 - 46
Condo Media - December 2022 - 47
Condo Media - December 2022 - 48
Condo Media - December 2022 - Cover3
Condo Media - December 2022 - Cover4
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