Again, in the hotel & food server industries tips are commonplace & expected. And to a certain extent hotel guests do affect the duties of the housekeeper. And the hotel guests are direct, intended beneficiaries of housekeeping services.
With respect to OP’s original post, the transaction meets the IRS definition both as a “tip” and as a “gift”. So that is why I assert that control of some aspect of the recipient’s performance & whether being a direct or incidental beneficiary are the deciding issues.
My position remains that, as presented by OP, each worker can give the custodian up to $15,000 without triggering a taxable event.
However, if that custodian performed any duties outside the normal course of his employment at the direction of & for the benefit of the employee giving the gift, then the gift is a tip and a taxable transaction has occurred.
P.S. In short, this is why tax attorneys make money. Remember the adage: In a town with just one attorney, the attorney will starve, but in a town with two attorneys, both will thrive.
Are gift cards given to a coworker considered taxable? In any way? These are employees who are giving a couple hundred dollars in gift cards as a holiday gift to their custodian.
I think it hinges on the intent of OP and her colleagues when they collect for and give the “gift” cards to the custodians. Are they rewarding and saying thank you for good service that the custodians may provide? That’s more like a tip, which would support an argument that the act is providing taxable income. Or are they simply making a friendly gesture to co-workers, perhaps during the holiday season when gift giving is a normal and traditional thing to do? That would support an argument that the transactions are gifts, with no tax consequences unless the amount of the annual gift tax exclusion is exceeded (currently $15k).
These points can be argued back and forth on an internet forum, but unless you are the OP and her colleagues, you don’t have the facts necessary to come to a logical conclusion.
I think that what you are doing is a nice gesture and that the gift cards are indeed gifts. (I go with “intent of the giver” as one of the primary factors.) On the other hand, I work at a place where employees receive gift cards when they reach certain anniversaries, and those are treated as income.
Wow, giving another , lower paid co-worker a gift is a taxable event?
At my school , as a group of friends or coworkers we can choose to give to one of our service staff families. We give them presents (I refuse to use gift as a verb) as we see fit. Many times these are gift cards to (Target, WalMart, Old Navy, etc) . Nobody is required to contribute and no extra services are being rewarded.
Could any of this be considered taxable income? If so, next Christmas I’ll just slip them an envelope…
Don’t complicate it. The employer/employee relationship is dispositive. The custodians have an employment relationship (either direct or by contract) with the building management. Individuals working in the building don’t have the employment relationship with the custodians. Therefore it is a gift. It is not a tip because tips come from customers. Customers pay for the goods and tip on the service (whether food, driving a cab, carrying bags, etc). The individuals working in the building are not customers.
Frankly, the IRS has gone stupid with some of this. I can give a $25 dollar turkey to an employee (non-taxable), but can’t give a $25 gift card (taxable) so the employee can buy their own darn turkey. Typical government. .
Some random thoughts. Obvious high school teachers should pay tax on all the Starbucks gift cards they get in consequence of writing a letter of reference.
And those over-generous tips that wait persons sometimes get - like someone paying off their student loans. Surely 20 or even 30% of the bill is income, the rest should be considered a gift (but likely isn’t).
What yourmomma said. Plus, how do you value a Starbucks GC? A $25 store gift card is not 25 bucks. You can only exchange the GC for goods at that retailer. Try to sell it for its face value and see what happens. This thread is like a discussion of a hypo in a tax class…
Thinking the IRS is spending man hours and somehow monitoring the holiday(?) spending activities (ie gift cards) of these employees, and/or also somehow monitoring how these custodians got the money for gift cards (eg under the table payments from non employers), all with intent of discovering unreported and taxable income, paranoia?
Gift cards from employers to employees are taxed on the face value of the gift card. This is not a hypothetical at least as it relates to “incentive compensation”. For example, open to all employees who meet a stated goal within a certain time period. However, most large employers allow the employee to select the company or companies for the gift cards. Taxed at full face value.
These gift cards were not coming from the company or funneled through payroll, they were not tips for services rendered, they came from co-workers. I am not sure how they could be considered income?
I agree, @bajamm. But I can understand the custodian not making this distinction and being concerned about being unexpectedly hit with a tax liability for which he or she didn’t plan.
I have to believe that custodians have NEVER EVER received any form (eg 1099 Misc) that would show the IRS knew of gifts cards and could connect gift card amounts to custodians (aka SSNs). I doubt employees obtain SSNs prior to giving out gift cards. As a custodian in facts here, I’d take the cards and other than a big thank you, I wouldn’t give any thought to reporting.
The fact that a Starbucks card is a little bit difficult to value is not relevant. People win prizes on game shows and have to pay tax on those too, the $10,000 European holiday may not be worth as much as 10K cash to you.
There is no logic to exempting teachers from paying tax on ‘gifts’ from students that arise from performing a specific task. No letter of reference, no gift card. The gift card to the teacher is optional, but so is the tip to your hair person.
You have all given me a great deal to think about. Thank you. I’m still mulling over the distinction between a tip and a gift. Baby shower gift card: gift. Retirement gift card: gift. Christmas cookies and fudge: gift. Christmas gift card: ?
