recognition
denjen
93 Posts
Recognition is all the rage in HR. Payroll does not share in our enthusiasm. Every time I think of a creative way to recognize or say thank you to an excellent employee, payroll says no because taxes have to be paid on it as if it is income. Can you tell me what is deemed income in the eyes of the IRS? Do employees have to pay income tax on clothes, food, gift certificates, gas cards?
Comments
The IRS does not require you to tax on anything it considers 'de minimus.' This generally means anything valued at under $25.00, though the IRS has never set that amount in stone.
You can give an employee discounts on your services and it is usually tax free. That pretty much depends upon the discount and the item they are getting.
If you want to give an employee recognition without it being taxable I suggest you do it in front of a lot of people, give them a plaque to commermorate the occassion, a nice small bouquet or a few roses, a lovely speech, and a small gift item that cost you less than $25. Otherwise it is includable as income.
Good luck!
Nae
Thus; Gas card for $20,plus a fruit basket, plus fishing tackle, plus a shirt all equal up to $100 but separtely they are all under $25. Therefore no income tax is applied?
If I got him a nice warm coat for $100 it would be taxable? Because the single value is over $25?
Everything has value if you are able to sell it.
When I give a turkey to every employee at Christmas how should that be handled?
What if they got a shirt with the company logo on it?
Gift Certificate?
Gas card is the same as cash, so it is taxable, even if it is only for 10 cents.
The rest depends. You can give a non-taxable award for length of service or safety achievement under this section, but they limit what it can be for (no meals, vacations, tickets to events, etc). It says it must meet the requirements set out in Pub 535 and the value of the awards must not exceed the total your company can write off as a business expense. It definitely reads and sounds like something the IRS would produce.
I know that as far as De Minimis benefits go, you can't lump several items together and call them separate if they are given on the same occassion. The IRS sees that as one multi-part gift and the entire amount is taxable.
I really can't help you on the shirt with a logo as I don't have any experience with it. If we were to give a gift of a shirt with our logo (they don't have to wear it as part of their work uniform), we would probably consider the value to be the cost of the shirt, without the logo added (that would reduce the value as far as resale goes) and use that amount as a basis as to whether or not we would consider it taxable.
I know it is very confusing. If I were you I would check out the two IRS publications and see if there is anything that qualifies that my employees might like.
Good luck!
Nae
Nae, I'm sorry to post this, but I just want to be certain we examine all possibilities before establishing protocol. You have been very knowledgable in all that I have read, but I have to question this one...based upon trust in the knowledge of our CEO.
Thanks.
Nae
BTW, a gift from one individual to another is not taxable unless it passes a threshold. It used to be $10,000 per year, but I believe it has gone up to $10,500 by now (or perhaps even higher). A gift from an employer to an employee is a completely different matter. Unless it falls under the strict guidelines for achievement awards or is considered de minimis it is taxable.
Good luck!
Nae
Payroll informs me that it is my job to figure this out and she needs to file in three days.
What forms do I need to pay his income tax on this gift?
How do I figure what the income tax is?
Help
Here is an example of how it might be handled (I will just use FICA tax for simplicity, but income taxes should be included and are done the same way.)
Regular Payroll:
Employee earns $1,000.00
FICA taxes - 76.50
Take home pay $ 923.50
Payroll with Gift worth $100:
Employee earns $1,000.00
Gift earnings 100.00
Total Gross $1,100.00
FICA taxes - 84.15
Misc Deduct -100.00
Take home pay $ 915.85
Another way to handle it would be to gross up the pay:
Payroll with Gift worth $100:
Employee earns $1,000.00
Gift earnings 108.28
Total Gross $1,108.28
FICA taxes - 84.78
Misc Deduct -100.00
Take home pay $ 923.50
To just gross up and not put on employee's check:
Payroll with Gift worth $100:
Gift earnings $ 108.28
Total Gross $ 108.28
FICA taxes - 8.28
Misc Deduct -100.00
Take home pay $ 0.00
Check with your payroll department to see if they have a standard form for this. They should. If they expect you to figure all this out (which seems bizarre to me), you will need to know the employee's tax withholding rates for both federal and state. I have a gross up formula spreadsheet to help you. Or if you will just give me the rates I will use your amount and put it through my spread sheet and put the answers here.
Let me know if I can help you further.
Nae
The CEO has decided to give this award in the name of our founder. No taxes right?
Nae
I appreciate your confidence in your CEO. Unfortunately, the "bullshit" lies with him in this case. NaeNae is 100% on the money.
I would like a copy of your spreadsheet. If you can please email a copy to [email]dbaker@detroit.lib.mi.us[/email]
Thank you
Nae
"Generally speaking, non-cash incentive awards are taxable. Income, Social Security and Medicare taxes should be withheld based on the fair market value of the award and the withheld amount should be deposited in the same deposit period that the awards are "paid."
Exceptions: Certain noncash employee achievement awards made for length of service or safety are excluded from wages (up to prescribed limits), as are certain noncash benefits of minimal value."
Ok. I know this was like beating a dead horse, but I feel so...so...vindicated. x;-)