Employee prize and payroll taxes

[Free4Life11]

We are doing a fun event at work next month and want to give gift cards as prizes but we're told two things: we can give gift cards up to $24.99 or items (iPods, etc.) without having to process them through payroll and take out taxes.

Is this true? I know I got a $25 gift card last year and they taxed it on my paycheck.

We just want to give whatever doesn't have to be taxed by payroll because that just sucks the fun out it!

 

[dakcp2001]

At my company a lot of people started refusing prizes because you would get a prize you could go buy for 30 bucks and get a tax statement saying it was worth 60. The prizes were always way over valued. We get taxed on ALL prizes EXCEPT gift cards. They usually give out GC in denominations of 10 bucks, but we can win multiple, so at the end of the day you may have 5 cards all worth 10 bucks each, maybe that it how they loophole around it?

 

[momof1princess]

my DH's company used to give us $50 wal-mart gc each quarter if the plant was accident free for that period and we weren't taxed for those, but about 6-8 months ago, they started adding a safety bonus to his paychecks each quarter instead, and we ARE taxed for those. i think it stinks, but i guess a bonus is a bonus.

 

[SeaSpray]

The small company that I work for (less than 50 employees) occasionally gives away gift cards and small prizes for incentives and during fun employee meetings.

Just yesterday the company gave away 7 used computer systems (CPU, 17" flat panel monitor, keyboard, mouse, speakers, printer/scanner) by way of raffle. They didn't charge us to put our names in the raffle, it was all free. I happened to be one of the winners.

We've never been taxed on the gift cards, and I'm sure we will not be taxed on these computer systems because knowing our HR department, and the COO of the company, they would've told us this up front.

I know that they do withhold taxes from the end-of-year bonuses that they give us.

 

[Amelia Peabody]

We are now having taxes taken for all gift cards. It used to be they tracked it until you hit $600, then they had to report the income. Maybe the law is changed. However, it really doesn't come out of pocket other than increasing your income.

For example. I win a $100 gift card. Assume the taxes are 25%. Payroll "pays" me $125, taxes are calculated then the $100 is deducted since I already received it. So my net has not changed. Just the gross and taxes.