Accounting, Payroll & Pension Issues/taxing gift cards

Advertisement

Expert: - 12/2/2010


Question
The company wants to give out $25 and $50 gift cards for the holiday to all employees.  Our finance manager is requiring a special payroll to enter the amounts in for taxes.  For gifts this small is this necessary?

Answer
Technically the law says it is.

Many companies assume the risk,if you are audited the worse case is you have to pay the taxes. They can't be that much on 25. Find out how top managment feels about it and if they decide to take the risk than it is their decision.

You can also find out how much medicare and SS tax would be on the card (don't worry about federal and state for this amount) and just pay it for the employees.

If you give out 25.00 gift cards at 7.65% you would pay 1.92 for each card. If you have 100.00 employees it would be 192.00. You will only have to pay fica and medicare if you are audited.

On a 50.00 gift card it would be 3.83 so for 100 employees it would be 383.00.

This is legal as you are paying the taxes for the employee.

Shirley  

Accounting, Payroll & Pension Issues

All Answers

Answers by Expert:

Ask Experts

Volunteer

Shirley McAllister, CPP, PHR

Expertise

I can answer payroll questions, payroll tax questions, 401K questions. No stock option questions please and I have some knowledge of other pensions but am most familiar with the 401K pension. I can answer U.S.and Canada payroll questions proficiently and have a good general knowledge of UK and South Africa and some knowledge of Australia and New Zealand Payroll procedures. Please do not ask me homework questions I do not have time to answer them.

Experience

25 years with an international company in the Human Resources, Payroll and Payroll Tax areas.

Organizations
SHRM, APA, I.O.M.A.

Publications
I.O.M.A. and BNA

Education/Credentials
P.H.R., C.P.P., Canadian Payroll Administrator, Successfully passed APA class on UK Payroll Administration. Boise State University Human Resource Certification

Awards and Honors
APA Hotline Citation of Merit for last 8 years.

©2012 About.com, a part of The New York Times Company. All rights reserved.