{"id":2610,"date":"2016-05-31T16:48:15","date_gmt":"2016-05-31T16:48:15","guid":{"rendered":"https:\/\/www.peeriosity.com\/shared-services\/articles\/?p=2610"},"modified":"2022-07-28T23:45:02","modified_gmt":"2022-07-28T23:45:02","slug":"providing-tax-relief-for-employee-gifts-and-awards","status":"publish","type":"post","link":"https:\/\/www.peeriosity.com\/shared-services\/articles\/2016\/05\/providing-tax-relief-for-employee-gifts-and-awards\/","title":{"rendered":"Providing Tax Relief for Employee Gifts and Awards"},"content":{"rendered":"

Providing gifts or awards to employees can be a big motivator<\/a> to those who have completed a special project or demonstrated exemplary performance where immediate recognition is appropriate.\u00a0 While a gift or award can be an exciting moment, the event can quickly lose its luster when it\u2019s left to the employee to both understand the tax implications and then cover the incremental tax burden associated with some types of recognition awards.<\/span><\/p>\n

Recently, Peeriosity\u2019s iPollingTM<\/sup> functionality was used to perform custom research in the Payroll research area<\/a>\u00a0to find out whether or not member companies gross up the value of gifts to pay required taxes on behalf of the employee, and, as a follow-up question, whether or not a minimum threshold<\/a> was used to make the determination.<\/span><\/p>\n

The results show that a range of options are used, with 35% of companies indicating that they always gross up to cover incremental taxes, and with 29% indicating that they gross up only when requested by the business unit to do so.\u00a0 For 18% it varies by either geography or by business unit, and at 12% of member companies, the gross-up happens only when an amount threshold is met<\/a>.\u00a0 Only 6% reported they never perform a gross-up of the award amount to cover the extra taxes the employee might incur.\u00a0 Here are the details:<\/span><\/p>\n

\"does<\/p>\n

When considering if a minimum threshold is used, for 62% of companies, all gift values are typically grossed up, so no threshold applies.\u00a0 For those companies that do apply a threshold, for 25% the threshold is less than USD $25, and for 13% the threshold is between $100 and $249.\u00a0<\/span><\/p>\n

\"minimum<\/p>\n

It\u2019s interesting that so many companies always make an adjustment to cover added taxes for the value of the gift, which in many cases requires intervention to complete the calculation, when, for small dollar incentives, the tax consequences are nominal and likely to be of little to no significance compared to the overall tax liability for the employee.\u00a0 After all, when employees complete their tax information to claim exemptions, they are using estimates for deductions that the employee may or may not have, with no visibility to the accuracy of the computations by the employer.\u00a0 In other words, with so many estimates already part of the tax computation process, it isn\u2019t likely anyone will be hit with a big unexpected tax bill based on\u00a0the value of a gift or an award, so the burning question is, why bother?<\/span><\/p>\n

Here are some of the comments from responding companies:<\/span><\/p>\n