Gift cards for employees

[Gretel]

I try to figure out the tax implications on these transactions. Employer gives $50 Gift Cards for restaurants to employees on their birthdays and in Holiday season.

Would this still qualify as the exception that says: Holiday gifts, other than cash, with a low FMV? Maybe even (on birth dates) as "Occasional tickets for entertainment events"? I know it's not an entertainment event but these events could easily cost $50 as well.

How do you handle these type of situations?

Previous bookkeeper posted these gift cards to M&E.

[taxmandan]

If the annual amount for an employee was $50 I would say it qualifies for the exceptioin. If an employee gets 2 or 3 of these each year for a total of $100+ I would treat it as a bonus. Not sure I would use M&E, more likely posted as Miscellaneous Gifts.

[AJsTax]

Not according to the IRS.

If the card have a definite cash value they are considered wages to the employee and must be reported as payroll. Even one $10 gift card a year. Only exceptions would be for safety rewards, etc. via a company policy. If the gift certificate is not for a certain amount of money, would be considered minimal, and is not feasible to accurately value then they might qualify as de minimus value employee benefits. One example is a turkey or a gift certificate only good for a turkey with no stated value.
If the gift cert is for a store, gas, restaurant, etc with a stated value then it is the same as a bonus and ALL bonuses are to be reported as wages and taxed the same.

I have small companies that try to pull the same trick every year at the holidays. I just tell them to make it a personal gift and do not try to run them through the company and they can gift all they want to the employee.

[Gretel]

AJ, do you by any chance have the resource for this that I could find on the internet to show to my employer?

Thanks.

[Lion]

Pub. 15-B

http://www.irs.gov/publications/p15b/ar02.html#en_US_publink1000193660

De Minimis (Minimal) Benefits

You can exclude the value of a de minimis benefit you provide to an employee from the employee's wages. A de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impracticable. Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare.

Examples of de minimis benefits include the following.

* Occasional personal use of a company copying machine if you sufficiently control its use so that at least 85% of its use is for business purposes.
* Holiday gifts, other than cash, with a low fair market value.
* Group-term life insurance payable on the death of an employee's spouse or dependent if the face amount is not more than $2,000.
* Meals. See Meals , later.
* Occasional parties or picnics for employees and their guests.
* Occasional tickets for theater or sporting events.
* Transportation fare. See Transportation (Commuting) Benefits , later.

Employee. For this exclusion, treat any recipient of a de minimis benefit as an employee.

[AJsTax]

Pub 15-b

As Lion posted, any item"Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare."
So so take one more step, if they can not be excluded, they must be included in taxable income, ie: wages.
Take note of the wording " no matter how little"

[Gretel]

Thanks, guys. You sure are convincing.