Accountants Ruin Another Christmas

Accountants have ruined yet another perfectly good holiday tradition: the annual gift card bonus.

Maybe this isn’t really a tradition yet, but it’s a nice gesture from a company to buy their employees a $25 card to an electronics store or something else fun (though you know media people all love their toys, so maybe we should just stick with Best Buy).

Entrepreneur magazine’s blog reminds us, though, that the value of gift cards are tax-deductible, so if your company gives out cards, you have to add that value onto employees’ W-2s. And if you’re an employee, even if the company doesn’t declare your $10 Barnes & Noble card as income, technically you must to comply with IRS guidelines.

So giving gift cards can be more trouble than they’re worth. Entrepreneur recommends just rounding up based on what you estimate each employees’ tax bracket to be–so if you want to give out a $100 gift card and the employee will have to pay $25 in taxes, just give a $125 card instead so the company eats the tax instead of the employee. But that’s not how it works; then they’ll just have to pay taxes on $125 worth of card.

The only gift cards that aren’t taxable are ones for the company’s own merch. Great if you work for Gap or Godiva, but if the only thing you can buy with your card is a logo hoodie, that’s probably more disappointing than paying extra tax.

Better yet, just give out gifts. Gifts up to $25 aren’t taxable, the scrooges at Entrepreneur remind us.

Photo: flickr user robinsonsmay