GIFTS THAT COMMAND TAXES
You’ve had a great year, and to thank your employees, you’ve decided to give them a gift. Will this gift be considered a taxable benefit, and will it have to be included in their income as if it were a bonus or salary?
The basic policy is that everything you give and pay to your employees is taxable. However, certain conditions apply.
The first $500 of gifts or awards, regardless of number, is not taxable if the gift or award is non-monetary. The $500 excess is. Gifts and awards include Christmas, birthday and wedding presents.
In addition, a non-monetary gift for years of service is not taxable if it is less than $500. In order to be eligible, the anniversary award cannot cover a period of less than five years, or the five years since a previous award was granted to the employee for years of service.
For the purposes of applying the $500 thresholds, annual gifts and awards are separated from anniversary or service awards. In other words, the fact that the gifts given to an employee in a given year have a value of less than $500 does not make it possible to award more than $500 for years of service. For example, if you give your employee a $300 Christmas gift, you can’t give him a $700 tax-free gift for his 10th anniversary of service. Otherwise, he will be taxed on $200.
In addition, items of negligible value, such as coffee, tea and trophies, are not considered a taxable benefit for employees. There is no monetary threshold for determining whether an amount is negligible. Factors to consider include the value, frequency and practicality of nominal benefit accounting.
Gifts received that are linked to the employee’s performance are taxable, as they represent a form of remuneration. A cash equivalent gift, such as a gift card, is taxable.
The administrative policy for gifts does not apply to employees who do not deal at arm’s length with the employer, such as members of the employer’s family or persons related to the employer.
This article appeared in: Les Affaires |
http://bit.ly/YBOWef
| January 26, 2013
http://bit.ly/YBOWef
| January 26, 2013
