Holiday Gift Cards

Question:

Do I really need to include a gift card in my employee's gross income?

Answer: Gift cards, gift coupons, and gift certificates are considered cash or cash equivalents and, as such, are considered income to the employee. Here are a couple excerpts from IRS Publication 15-B.

Nontaxable Exclusion for Achievement Awards, Page 8: “The exclusion doesn't apply to awards of cash, cash equivalents, gift cards, gift coupons, or gift certificates (other than arrangements granting only the right to select and receive tangible personal property from a limited assortment of items preselected or preapproved by you).” [Emphasis mine.]

Nontaxable De Minimis (Minimal) Benefits on Page 9: “Cash and cash equivalent fringe benefits (for example, gift certificates, gift cards, and the use of a charge card or credit card), no matter how little, are never excludable as a de minimis benefit.” [Emphasis mine.]