Last weekend, at our company Christmas party, we were all given gift certificates from our employer as Christmas "gifts." A few days later, we were all handed a form to sign. The form first asks you to acknowledge that you received the certificates, and then asks you to "approve" that the amount will be added to the your next paycheck for "W2 purposes."
I have never received a Christmas bonus or gift from any company I've worked for, then had it added to my paycheck. I'm not sure I want to have to pay state/fed taxes on this supposed "gift." Is this becoming a common practice now? What's behind this?
Part of me wants to hand the certificates back and say "no thanks." It's not that much money.
All advice/info welcomed.
2007-12-13 05:25:44 · 5 answers · asked by milomax 6 in Business & Finance ➔ Taxes ➔ United States
Legally they have to take the taxes out. I haven't heard of having a form to sign, but they probably just wanted to make sure you knew about it.
This isn't a new law, but it's one that hasn't always been followed. Bonuses have been taxable - if you've gotten bonuses and not been taxed on them, your employers have been skirting the law. Gifts from employers other than token gifts like maybe a turkey at Thanksgiving have also by law been taxable.
To answer your question - yes, sign the form.
2007-12-13 11:47:15 · answer #1 · answered by Judy 7 · 0⤊ 0⤋
The only thing that's odd is that your employer is telling you the money is going to be added to your W-2 and giving you a choice as to whether or not you want to keep the gift certificates.
The employer is REQUIRED to tax you on these gift certificates. The tax will be around 22-25%--so if the gift certificate is $100, it's really worth $75 to you. Will you get $75 of value? If yes, sign and say thank you.
(Only if they gave you an actual turkey could they ignore the tax issue.)
2007-12-13 13:33:28 · answer #2 · answered by Anonymous · 1⤊ 0⤋
The IRS considers employee gifts of cash or their equivalent (gift certificates) to be compensation. In other words, in the IRS' eyes you received an increase to your total wages.
As the person above said, employers are required to put it on your W-2, along with withholding any federal or state taxes AND applying FICA.
If you are going to be able to use the gift certificate, then take it and use it. At the end of the day you are still netting more than you had before. Just my suggestion.
2007-12-13 13:46:27 · answer #3 · answered by Molly 6 · 0⤊ 0⤋
If it is more than $25 it is taxable.
You'll need to decide if the gift certificates are worth the cost of the taxes.
Say it is $100 gift cert, you would pay (depending on your tax status and state) about $35 to $40. Theis means you are ahead $60 bucks or so. The decision is yours.
2007-12-13 13:31:23 · answer #4 · answered by Tim 7 · 3⤊ 0⤋
I know what you mean I worked for a man who gave me between 100 and 200 dollars each year I worked for him. It was not put on the W-2 form until the last year when he was not making as much money as he as he did before. I now work for a company which taxes everything they give you.
2007-12-13 17:38:09 · answer #5 · answered by Coop 366 7 · 0⤊ 0⤋