Holiday Gift Cards for Employees

Dave Moja | Nov 15, 2017 | TaxTips Blog


Although actual turkeys and hams given to employees are generally non-taxable, holiday gift cards are another story.


Idaho Bible College & Seminary (IBCS) is a private college exempt under Internal Revenue Code section 501(c)(3) and section 170(b)(1)(A)(i).  They are not required to file Form 990 annually.

Every Thanksgiving, the President of the seminary presents each employee with a $20 grocery store gift card to say “Thank You” and help out with their family’s feast.

Sheila, the CFO at IBCS follows “Tax Tips.” She calls to say that she reviewed the 11/16/16 edition and now wonders whether or not the value of these gift cards should be included on the employee’s W-2 each year.  She says, “It seems like the 2015 PATH Act’s “safe harbor” would allow us to omit the $20 gift card value from each employee’s 2017 Form W-2.”

We tell her that last Thanksgiving we thought that the PATH Act safe harbor might allow for a “de mininis” gift card (under $25) to be inherently nontaxable to employees.  However, although it appeared that the PATH Act safe harbor might be of help in this area, the IRS clarified in early 2017 that the safe harbor “applies only to inadvertent errors” and thus “known” gift cards must be reported on Form W-2 each year.

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