Author Topic: Company Gifts & Tax  (Read 3014 times)

KeeKat

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Company Gifts & Tax
« on: December 24, 2014, 02:57:18 PM »
Hello Mustachian friends!

I'm hoping there might be an HR/Tax whiz out there that can help in my current situation. I'm afraid this is more of a vent thread than a solution thread, but I'm very irritated and no one in my company in any position of answering questions is being much assistance.

Our company gave incentives for participating in a United Way campaign in September. Incentives included everything from $10 restaurant gift cards and company branded umbrellas to iPad Minis and $500 Visa Gift Cards. Now (three months later), the 100 people who won those incentive items are being taxed on the value of their winnings at 40% of the value (ex. $4.07 taken off the person who won the $10 restaurant gift card -- Yes, I realize that I won't end up paying 40% come tax time, but I'm still irritated by the whole principle of the matter). There was no warning or notice that this would happen and winnings/gifts like this have NEVER been taxed by the company before.

I think I'm more upset about it because our HR department is being quite difficult and rude about the situation. I was told by the head of HR that we as employees should have expected taxes on these items (to which I reminded her we have NEVER been taxed like this before in the history of the company). Just this summer I won a $50 gift card and paid no additional taxes.

I've been reading up on the topic and it seems like the company should have been taxing us all along. I guess my question then comes to, can they suddenly begin doing this with no notice to employees?

To my tax-smart friends, is there anything we (the winners) can do in this situation? Or are there situations gifts wouldn't be taxed that I should look to be part of in the future? At this point I'd rather not win a $10 gift card if I'm going to worry about taxes being taken out of a random, future paycheck.

Thank you for listening! /endrant :P

dandarc

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Re: Company Gifts & Tax
« Reply #1 on: December 24, 2014, 03:19:55 PM »
http://www.shrm.org/hrdisciplines/compensation/articles/pages/holiday-gifts-taxable.aspx

Looks like you might be SOL on this one.  Maybe suggest that the United Way provide any of this type of thing rather than the employer next year?  You'd still have to reduce your deduction by the value of the stuff, I think, but you wouldn't be hit with withholding if the incentive came from the charity itself.

KeeKat

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Re: Company Gifts & Tax
« Reply #2 on: December 24, 2014, 04:04:31 PM »
Thanks Cathy & dandarc!

Yeah... I think I'm going to lose this fight. It's just very frustrating, especially for folks like us who budget out savings targets pretty exactly.

*sigh*

I'll certainly see if there's any way the company will consider paying the taxes. I have read that a number of places will give a $30 gift card instead of $25 but give it a face value of $25 to cover the costs for employees. Thanks for the ideas!

MDM

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Re: Company Gifts & Tax
« Reply #3 on: December 24, 2014, 04:29:59 PM »
...budget out savings targets pretty exactly.

An admirable goal, but "stuff (even worse than unexpected tax withholding) happens" so you might want to establish at least a one-month emergency fund....

Did you at least get value greater than the tax?  It would be very bad if you received some useless item and had to pay the tax, but with a useful gift card (i.e., to a place where you would spend even without the card) at least you are getting "free money" from the employer.

KeeKat

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Re: Company Gifts & Tax
« Reply #4 on: December 24, 2014, 04:40:41 PM »
I was lucky and received something that was worth more value than the tax gift card style, but a number of coworker friends of mine received company-branded umbrellas and cups that they were then charged taxes on.

Great idea about the emergency fund! I do have an e-fund and this won't really affect me much, but it's still an irritation. More the principle of the matter than the few bucks itself, ya know? My savings had already taken a huge hit this month with the purchase & installation of snow tires, so December hasn't been kind, haha!

dandarc

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Re: Company Gifts & Tax
« Reply #5 on: December 24, 2014, 08:58:09 PM »
Yeah - tracking mugs is nuts and unnecessary.  http://www.irs.gov/Government-Entities/Federal,-State-&-Local-Governments/De-Minimis-Fringe-Benefits

However, a gift card typically is supposed to be tracked.