Payroll Tip-Employee Gifts, What’s Taxable and What’s Not?
Employee gifts or awards, are often given in recognition for a job well done, however, some gifts are considered taxable and must be included in payroll. Keep the following in mind as you start a new payroll year.
If the prize or award is a merchandise bonus, you must use the fair market value of the item – NOT the cost; to compute overtime pay.
If your company throws a holiday party – perhaps a Christmas party, for employees and their families; the company can deduct 100% of the cost at the end of the year on your tax return. The cost of the party is not taxable to employees or their families. And the same rules apply to a New Year’s Eve cocktail party.
Your company can give each employee a turkey, a ham, or a gift basket as a holiday gift without worrying about it becoming taxable or having to include it in payroll. On the other hand, if you give your employees a gift certificate for a turkey, a ham, a gift basket or even a $5.00 pen, then it becomes taxable.
Even a simple $10.00 bonus is subject to taxes and must be included when calculating payroll taxes.
Length of service awards, given before 5 years of service are taxable. The same award is not taxable for more than 5 years of service, but you cannot give them more frequently than every 5 years.
Rewarding your employees for a job well done is a good moral booster and makes them feel appreciated. Make sure that you know the rules regarding taxability; so nothing comes back to bite you later.
One Response to Payroll Tip-Employee Gifts, What’s Taxable and What’s Not?
Leave a Reply
- The Great Debate – QuickBooks Desktop vs. QuickBooks Online
- Using Account Numbers in Your QuickBooks Chart of Accounts
- QuickBooks Creating a More Meaningful Payroll Expenses Section
- Calculating & Displaying Fringe Benefits on a Certified Payroll Report
- QuickBooks Tip - Child Support Garnishments
- How To Turn On and Use Manual Payroll in QuickBooks
- Create a QuickBooks Job Cost Report With Hours & Payroll Costs
- QuickBooks Payroll Tip - Tracking Employee Advances or Loans
- QuickBooks for Contractors Tip – Basics of Progress Invoicing
- QuickBooks Tip - Job Costing Starts With A Simple Item
- QuickBooks Tip-Creating a Functional Payroll Liabilities Section
- QuickBooks Tip: Important Facts About Items Left as Billable
- Welcome to the QuickBooks for contractors blog
- QuickBooks Tip-Handling Employee Reimbursements for Expenses
- QuickBooks Tip - Determing Cost of Goods Sold
- QuickBooks Tip - Handling Retainage
- QuickBooks 2015 Announced - Important System Requirements
- Straight from the IRS - Social Security Tax Reduced to 4.2%
- How to Calculate & Display Retainage on an AIA G-702/G-703
- Tips for Effectively Using QuickBooks Purchase Orders