re: I was taxed on Xmas gift cards

It’s income Baw

0k, idiot down voter, prove me wrong.

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I refuse to believe anyone is this dumb.

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i used to say this all the time...then i realized i was wrong

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Lucky it wasn’t a bonus otherwise you’d have lost 30%

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People thinking withholdings are what you owe is incredible

I didn't read this lengthy thread, so maybe someone already posted this. From the IRS's website on gifts to employees:

In general, a de minimis benefit is one for which, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical. De minimis benefits are excluded under Internal Revenue Code section 132(a)(4) and include items which are not specifically excluded under other sections of the Code. These include such items as:

Controlled, occasional employee use of photocopier
Occasional snacks, coffee, doughnuts, etc.
Occasional tickets for entertainment events
Holiday gifts
Occasional meal money or transportation expense for working overtime
Group-term life insurance for employee spouse or dependent with face value not more than $2,000
Flowers, fruit, books, etc., provided under special circumstances
Personal use of a cell phone provided by an employer primarily for business purposes
In determining whether a benefit is de minimis, you should always consider its frequency and its value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation.

Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the excess over a designated de minimis amount. The IRS has ruled previously in a particular case that items with a value exceeding $100 could not be considered de minimis, even under unusual circumstances.

Cash benefits
Cash is generally intended as a wage, and usually provides no administrative burden to account for. Cash therefore cannot be a de minimis fringe benefit. An exception is provided for occasional meal or transportation money to enable an employee to work overtime. The benefit must be provided so that employee can work an unusual, extended schedule. The benefit is not excludable for any regular scheduled hours, even if they include overtime. The employee must actually work the overtime.

Meal money calculated on the basis of number of hours worked is not de minimis and is taxable wages.

Gift certificates
Cash or cash equivalent items provided by the employer are never excludable from income. An exception applies for occasional meal money or transportation fare to allow an employee to work beyond normal hours. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable.

A certificate that allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently, and is administratively impractical to account for, may be excludable as a de minimis benefit, depending on facts and circumstances.

Achievement awards
Special rules apply to allow exclusion from employee wages of certain employee achievement awards of tangible personal property given for length of service or safety. These awards

Cannot be disguised wages
Must be awarded as part of a meaningful presentation
Cannot be cash, cash equivalent, vacation, meals, lodging, theater or sports tickets, or securities.
In addition, there are other requirements specific to achievement and safety awards and there are dollar limitations that must be met. See Publication 5137, Fringe Benefit Guide PDF or Publication 535 PDF for more information.

How are de minimis fringe benefits reported?
If the benefits qualify for exclusion, no reporting is necessary. If they are taxable, they should be included in wages on Form W-2 and subject to income tax withholding. If the employees are covered for Social Security and Medicare, the value of the benefits are also subject to withholding for these taxes. You may optionally report any information in box 14 of Form W-2.

Page Last Reviewed or Updated: 20-Aug-2024

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Look folks, my employer gave me $700 worth of gift cards ($200 @ Thanksgiving, $500 for Xmas) and i have to repay the company back out of todays paycheck. Take for example, if i owned a company, and handed out gift cards to my employees for the holidays, then deducted it from everyone's paycheck, wouldn't that cause a rift? It's basically Indian Giving, amirte?

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I'm sure you are misreading the paystub. I encountered the same type of situation at my first job in the 1970s. I worked at a place that provided meals to its employees. Normal hourly wages were calculated, added to them was the $.15/hr meal compensation. The total was used for withholding tax calculations (income tax, fica, and medicare taxes). Then all withholding tax and the meal compensation were subtracted from the gross pay to produce the net pay (the paycheck total). This is what your company did, you were not taxed on income and forced to repay same income.

example:

40 hrs at $3.00 per = 120.00
40 hrs at $0.15 per = 6.00

Total Gross Wages = 126.00
Federal Income Tax = -12.60
FICA = -7.88
Medicard = -1.82
State Income tax = 0.00
Meals = -6.00

Net Pay = $97.70


This is exactly what your company did, not what you think they did.

Truthful question: Was your paycheck roughly $700.00 lower than usual? If not, you are misreading your paystub.

I had a pretty shitty day today and this thread is exactly what I needed; relatively speaking I’m doing pretty well in life intelligence wise

Gots to pay the piper don’t you?

I need to keep bumping this thread until this dude comes back and admits he was reading his pay stub wrong this whole time and he’s an idiot.

The reason for taxing the gift cards is because the company is writing that off as a payroll expense which reduces their capital gains liability.

However if an owner wasn't cheap as frick, they could take a distribution, which would be from already taxed capital gains and then buy gift cards or cash to hand out.

The company / owner would end up paying roughly 20-25% more for the gift cards, which should be considered as a cost of handing out gift cards. If they didn't want to pay that, then don't do fking gift cards and just give cash bonuses. At least employees wouldn't be obligated to spend their income at a business they don't want to.