Is a Turkey Taxable

Issue: Fall is upon us, and before you know it, the holiday season will be here. As HR director for a small company, you are considering giving each employee either a turkey or ham for Christmas, or a gift certificate of $25 to a local store. Would there be any difference between the gift certificate and the turkey or ham as far as either gift being subject to tax liability for the employees?

Answer: Yes. A non-cash Christmas gift will not be considered wages subject to employment taxes if the gift is of nominal value. The value of a turkey or ham is of nominal value and will not constitute wages. However, if the company presented to each of its employees a $25 gift certificate, this would constitute wages subject to tax. Gift certificates of nominal amounts may be subject to employment taxes. Such certificates or similar items of readily convertible cash value are included in wages. Gift certificates redeemable in merchandise are not included in wages.

Christmas gifts that are given to employees are generally presumed to be compensatory in nature and are treated as wages for FICA, FUTA, and federal income tax withholding purposes. The fact that a payment is made voluntarily or that the company receives no economic benefit from making it is not enough to overcome the presumption that the payment is compensation for services rendered.

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