In this edition of Did You Know? we look at certain gifts and awards given to employees and the taxable consequences that result. If you would like to know more, give us a call or send us an e-mail and we can help you plan your employee compensation system!
Gifts, Awards and Cash-related items given to employees can sometimes trigger certain tax consequences to both the employee and the employer. The primary factor to keep in mind is that near-cash or cash will always be a taxable benefit to your employees, regardless of the amount. This is why when planning a year-end event with gifts to your employees, you should keep in mind the tax treatment.
Are you planning an event for your staff? Are you looking to give a gift to an employee?
These are important questions which we can help you solve! Contact a tax professional today to get your business on track for reporting purposes.
Some of the important definitions are below.
A gift has to be for a special occasion such as a religious holiday, a birthday, a wedding, or the birth of a child
An award has to be for an employment-related accomplishment such as outstanding service, or employee’s suggestions. It is recognition of an employee’s overall contribution to the workplace, not recognition of job performance, which is considered to be a reward and is taxable.
A gift card is classified as near-cash and is always treated as a taxable benefit, just like cash.
Non-cash gifts and awards may be provided to an employee with a combined total value of $500 or less annually. The value exceeding $500 must be included in the employee’s income.
Additionally, once every five years an employee may receive a non-cash long-service or anniversary award valued at $500 or less, tax free.
The value of a gift is determined using the fair market value (including GST/HST), not its cost to you.