Are Christmas cash bonuses or gift certificates supposed to be taxed??
Roman
15 Posts
I have been asked by our CFO to consider paying payroll taxes on the value of Christmas gift certificates which are given to over 200 employees as a gift for the holidays.
I had always been under the impression that there is a minimal level of value for gifts that is not taxable (perhaps $25.00). One legal opinion is that any cash gift or gift certificate equivalent to cash does not fall under what is known as the de minimis rule (providing the value of a meal, use of office equipment, paying small amounts for transportation expense, etc.). Does anyone have the official word on this?
Your help is most appreciated in the spirit of the holidays.
I had always been under the impression that there is a minimal level of value for gifts that is not taxable (perhaps $25.00). One legal opinion is that any cash gift or gift certificate equivalent to cash does not fall under what is known as the de minimis rule (providing the value of a meal, use of office equipment, paying small amounts for transportation expense, etc.). Does anyone have the official word on this?
Your help is most appreciated in the spirit of the holidays.
Comments
>One legal opinion is that any cash gift or gift
>certificate equivalent to cash does not fall
>under what is known as the de minimis rule
That opinion, legal or otherwise is correct. Check out Publication 525 of the IRS code under the section on Holiday Gifts. You can give a ham or turkey and not tax it, but cash or gift certificates must be claimed as income, regardless of the amount.
(Thank you marc for the link on [url]www.thehrforum.net[/url] !)
I checked with the SHRM resource center and they gave the same response.
The way I read this, the burden is on the employee to declare the gift as income vs. the employer to withhold taxes in the first place. Did I miss something?
"Holiday gifts. If your employer gives you a turkey, ham, or other item of nominal value at Christmas or other holidays, do not include the value of the gift in your income. However, if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved."
You have summarized what the IRS seems to say about this issue. Best thing to do is stay with turkeys and hams to avoid the tax thing.