Gift Card From Employer

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
Post Reply
tomd37
Posts: 2669
Joined: Thu Mar 01, 2007 10:39 pm
Location: Middle Tennessee

Gift Card From Employer

Post by tomd37 » Mon Dec 11, 2017 10:25 pm

Reportable income by recipient and/or business expense by donor?

Today I arrived at my local Costco store fifteen minutes prior to the normal opening hour of 10am thinking I could get in early ahead of the crowd to get new reading glasses. Upon arrival I was amazed to see virtually the entire parking lot filled and a police car sitting at the main entrance watching traffic. Never before have I seen that!

I was advised that the owner of local large "financial" organization gave each of his employees a $1,000 Costco gift card and had made arrangements with the local Costco for a special opening just for those employees to do their Christmas shopping between 8am and 10am prior to Costco's regular opening. ("Peace be with them"). I have respect for this donor as he helps a lot of people out with their financial situations, particularly with debt, but I don't care for his investment strategies. Enough said. This situation got me to thinking....

Is the $1,000 gift card considered as income to the recipient as other income? I personally think not because anyone can give anyone a gift of up to $14,000 in one year and it not be considered income to the recipient.

Could this gift to the employees be somehow considered as a business expense for this "financial guru" and be written off somehow?

Anyway, everyone seemed to be enjoying themselves except those who expected to be let in around 9:45am as is customary for a 10am opening. Didn't bother me though as I viewed and enjoyed all the smiling faces coming out the exit doors from the store.
Tom D.

HIinvestor
Posts: 1344
Joined: Tue Apr 08, 2014 3:23 am

Re: Gift Card From Employer

Post by HIinvestor » Mon Dec 11, 2017 10:31 pm

If the employer files a form with the IRS reporting it as income, yes, this is indeed income that needs to have appropriate taxes paid. Since apparently do many cards were given, likely the tax forms will be sent to IRS.

If employer doesn’t file the forms with IRS, employees can claim it was “gift.”

Miakis
Posts: 301
Joined: Sat Aug 16, 2014 6:40 pm

Re: Gift Card From Employer

Post by Miakis » Mon Dec 11, 2017 10:40 pm

As a general rule, if a business deducts an expense, then it's income for someone else.

If the business deducts the $1000 bonus, then the proper way to treat it is as wages subject to FICA and W-2 reporting. When giving the bonus as a gift card, they'd really have to gross up the gift and also pay the payroll taxes.

Another option is that the business in this case does not deduct the bonus, but instead the owner choses to give the money away as a gift. Non deductible to the business and not includable in income for the recipient.

A common treatment is for businesses to give gift card gifts to their employees, not include them as compensation, but deduct them as some kind of Miscellaneous labor cost. That is the incorrect way to treat a bonus! Random reporting of bonus income on a 1099 is also not correct.

In any case, the employer should be clear with the employees - is this a bonus or a gift? Because improper reporting by the employer does not technically exempt the employee from reporting a bonus as income on their tax return.

123
Posts: 2730
Joined: Fri Oct 12, 2012 3:55 pm

Re: Gift Card From Employer

Post by 123 » Mon Dec 11, 2017 10:48 pm

IRS guidelines generally provide that all remuneration from an employer to employees is considered to be wages (taxable) and would be included as such on a W-2. There are some exceptions for de minimis situations and some service awards. $1,000 would count as wages. The presumption is that pretty much anything the employer provides the employee is furthering the aims of the employer and accordingly is considered wages.
The closest helping hand is at the end of your own arm.

User avatar
whodidntante
Posts: 2514
Joined: Thu Jan 21, 2016 11:11 pm

Re: Gift Card From Employer

Post by whodidntante » Mon Dec 11, 2017 10:59 pm

I would probably report it. I hate the experience of shopping at Sam's and Costco, so I would probably sell the gift card to a friend or on the open market. I would guess the discount I would need to give could be deducted somehow, but I'm not sure.

Swimmer
Posts: 190
Joined: Tue Dec 29, 2015 4:24 pm

Re: Gift Card From Employer

Post by Swimmer » Tue Dec 12, 2017 8:13 am

I worked for a not-for-profit who frequently gave staff members $100 gift cards. It was always included in compensation and fully taxable.

Jags4186
Posts: 1594
Joined: Wed Jun 18, 2014 7:12 pm

Re: Gift Card From Employer

Post by Jags4186 » Tue Dec 12, 2017 8:17 am

Employeres, if you're reading, if you're giving your employees gift cards and intend to report it on their W2....don't give them a gift card. Just give them it through payroll. No one wants a gift card that can only be used at one place, or even a Visa card that you can't deposit into the bank.

cherijoh
Posts: 4245
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Gift Card From Employer

Post by cherijoh » Tue Dec 12, 2017 8:22 am

tomd37 wrote:
Mon Dec 11, 2017 10:25 pm
Reportable income by recipient and/or business expense by donor?

Today I arrived at my local Costco store fifteen minutes prior to the normal opening hour of 10am thinking I could get in early ahead of the crowd to get new reading glasses. Upon arrival I was amazed to see virtually the entire parking lot filled and a police car sitting at the main entrance watching traffic. Never before have I seen that!

I was advised that the owner of local large "financial" organization gave each of his employees a $1,000 Costco gift card and had made arrangements with the local Costco for a special opening just for those employees to do their Christmas shopping between 8am and 10am prior to Costco's regular opening. ("Peace be with them"). I have respect for this donor as he helps a lot of people out with their financial situations, particularly with debt, but I don't care for his investment strategies. Enough said. This situation got me to thinking....

Is the $1,000 gift card considered as income to the recipient as other income? I personally think not because anyone can give anyone a gift of up to $14,000 in one year and it not be considered income to the recipient.

Could this gift to the employees be somehow considered as a business expense for this "financial guru" and be written off somehow?

Anyway, everyone seemed to be enjoying themselves except those who expected to be let in around 9:45am as is customary for a 10am opening. Didn't bother me though as I viewed and enjoyed all the smiling faces coming out the exit doors from the store.
My megacorp employer has an employee recognition program which awards points based on the level of award - bronze, silver, etc. (The points can be redeemed for gifts or gift cards from a third party vendor). This shows up as income on employee's pay-stubs and W-2.

Soon2BXProgrammer
Posts: 360
Joined: Mon Nov 24, 2014 11:30 pm

Re: Gift Card From Employer

Post by Soon2BXProgrammer » Tue Dec 12, 2017 9:04 am

cherijoh wrote:
Tue Dec 12, 2017 8:22 am
tomd37 wrote:
Mon Dec 11, 2017 10:25 pm
Reportable income by recipient and/or business expense by donor?

Today I arrived at my local Costco store fifteen minutes prior to the normal opening hour of 10am thinking I could get in early ahead of the crowd to get new reading glasses. Upon arrival I was amazed to see virtually the entire parking lot filled and a police car sitting at the main entrance watching traffic. Never before have I seen that!

I was advised that the owner of local large "financial" organization gave each of his employees a $1,000 Costco gift card and had made arrangements with the local Costco for a special opening just for those employees to do their Christmas shopping between 8am and 10am prior to Costco's regular opening. ("Peace be with them"). I have respect for this donor as he helps a lot of people out with their financial situations, particularly with debt, but I don't care for his investment strategies. Enough said. This situation got me to thinking....

Is the $1,000 gift card considered as income to the recipient as other income? I personally think not because anyone can give anyone a gift of up to $14,000 in one year and it not be considered income to the recipient.

Could this gift to the employees be somehow considered as a business expense for this "financial guru" and be written off somehow?

Anyway, everyone seemed to be enjoying themselves except those who expected to be let in around 9:45am as is customary for a 10am opening. Didn't bother me though as I viewed and enjoyed all the smiling faces coming out the exit doors from the store.
My megacorp employer has an employee recognition program which awards points based on the level of award - bronze, silver, etc. (The points can be redeemed for gifts or gift cards from a third party vendor). This shows up as income on employee's pay-stubs and W-2.

This is the same for my megacorp, however they gross up the paystub with the "supplemental withholding rate" and FICA.

cherijoh
Posts: 4245
Joined: Tue Feb 20, 2007 4:49 pm
Location: Charlotte NC

Re: Gift Card From Employer

Post by cherijoh » Tue Dec 12, 2017 9:23 am

Soon2BXProgrammer wrote:
Tue Dec 12, 2017 9:04 am
This is the same for my megacorp, however they gross up the paystub with the "supplemental withholding rate" and FICA.
Yeah mine does too.

munemaker
Posts: 2385
Joined: Sat Jan 18, 2014 6:14 pm

Re: Gift Card From Employer

Post by munemaker » Tue Dec 12, 2017 1:40 pm

Jags4186 wrote:
Tue Dec 12, 2017 8:17 am
No one wants a gift card that can only be used at one place, or even a Visa card that you can't deposit into the bank.
I would like one please!

rashad3000
Posts: 123
Joined: Fri Feb 24, 2017 11:20 pm

Re: Gift Card From Employer

Post by rashad3000 » Tue Dec 12, 2017 1:54 pm

munemaker wrote:
Tue Dec 12, 2017 1:40 pm
Jags4186 wrote:
Tue Dec 12, 2017 8:17 am
No one wants a gift card that can only be used at one place, or even a Visa card that you can't deposit into the bank.
I would like one please!
Me too! I'd love $1000 to Costco, or anywhere else!

bloom2708
Posts: 3139
Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Gift Card From Employer

Post by bloom2708 » Tue Dec 12, 2017 1:57 pm

At my company a gift card is always re-portable income. Even $5 or $10.

If you buy an actual item (as a gift or door prize), then you can spend up to $75 and not report it.

I makes no sense to me. For that reason if we have team events, we always get some item that 75% of the people already have or don't want.
"We are here not to please but to provoke thoughtfulness" Unknown Boglehead

User avatar
DaftInvestor
Posts: 3436
Joined: Wed Feb 19, 2014 10:11 am

Re: Gift Card From Employer

Post by DaftInvestor » Tue Dec 12, 2017 3:37 pm

In my company all gifts are income.
As big thank you's to the top employees several $10,000 watches were given out one year. Some of the folks didn't realize when they accepted the nice watch that they would be paying income taxes on it (and were shocked to later find out how expense the watch they received was when they saw the line item on their W2). I learned this when I was once awarded a trip by a company I worked for - didn't realize I would be paying income taxes on the trip (although I would have gone just the same).

Post Reply