27 Nov Can I give my employees gift cards for the upcoming holidays?
Yes, but keep in mind that the value of the gift cards must be reported as wages.
The IRS has a provision that allows for non-taxable “De Minimis” gifts, which allows an employer to buy an employee flowers to celebrate an achievement, occasional sporting event tickets, morning donuts, lunch, etc. without having to include it in the employee’s taxable wages.
However, the IRS requires all cash and cash-equivalent benefits be included in regular wages, regardless of size. Gift cards are considered “cash-equivalents,” and, therefore, have to be reported as wages to the employee.
When you do report it, consider whether this gift card should be treated as a discretionary or a nondiscretionary bonus. In most cases where each individual is given the same amount solely at the employer’s discretion, a gift card will be considered discretionary.
If, however, you tie the receipt of the gift card to a certain level of performance, it may be considered nondiscretionary. In that case, it would need to be included in the regular rate of pay before making any overtime calculations.
Original content by HR Ministry Solutions. This information is provided with the understanding that Payroll Partners is not rendering legal, human resources, or other professional advice or service. Professional advice on specific issues should be sought from a lawyer, HR consultant or other professional.