Gift Certificates are taxable wages
It is customary to think of gifts as having no tax consequences for the recipient, the Internal Revenue Code (Code) does not treat all gifts the same.
Keep the following rules of thumb in mind when giving out end of the year or holiday gifts.
- Nominal Value gifts such as a ham, turkey, gift basket or other tangible item is typically not considered wages and is not taxable. Nominal value is typically under $25.
- Gift Certificates or similar item that allows the employee to choose what they want to purchase is considered wages and is taxable.
For more information visit Littler Mendelson P.C. Employment and Labor Law Solutions Worldwide.