Question: We have a point system for our employees in which we award gift cards. These amounts are updated on the payroll for each employee that is a recipient of these awards. Our question is how we need to file these documents for proper recordkeeping. Can we keep one file with a spreadsheet of names indicating that we updated the gift cards on payroll or do we need to have some type of form filed in the employee’s personnel file separately for the award update?
Answer from the experts at HR.BLR.com:
Thanks very much for your question.
Here’s what the IRS has to say about gift cards given to employees:
Cash or cash equivalent items provided by the employer are never excludable from income. An exception applies for occasional meal money or transportation fare to allow an employee to work beyond normal hours. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable.
A certificate that allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently, and is administratively impractical to account for, may be excludable as a de minimis benefit, depending on facts and circumstances.
More information is available on de minimis fringe benefits from the IRS.
Because these gift cards are likely considered taxable income to the employees receiving them, they should be recorded as such. You may also wish to make a corresponding note in an employee’s personnel file (to record that this recognition was given). Though this is not required, it could be helpful when—for example—performance appraisals roll around.