2017-03-01 00:00:00PayrollEnglishBuying a gift for an employee? You may want to avoid gift cards. Learn about their tax liability for payroll and review other options.https://quickbooks.intuit.com/ca/resources/ca_qrc/uploads/2017/06/Business-owner-getting-employee-gifts-together.jpghttps://quickbooks.intuit.com/ca/resources/payroll/dont-give-gift-cards-as-rewards/Don't Give Employees Gift Cards as Rewards

Don’t Give Employees Gift Cards as Rewards

1 min read

If you are giving a gift or award to your employee, it’s important to remember that cash and gift certificates are always taxable. For example, if you give your employee a $100 gift certificate to Tim Hortons, your employee must report that amount as income and you must pay payroll taxes on it. To reduce your tax liability, consider giving your employees actual physical gifts such as golf clubs, blenders, or gaming consoles. These items may be taxable in certain situations. The Canada Revenue Agency allows you to give non-taxable gifts to employees for special occasions such as birthdays, holidays, or weddings up to a certain value per year. Additionally, the agency lets you give employees non-taxable rewards for special accomplishments, but the accomplishments must be related to job performance. For instance, if you give an employee an award for being voted employee of the month, that is typically non-taxable. However, if you give an employee an award for meeting sales goals, that is a taxable gift. If you want to avoid a costly bill at tax time, it’s important to understand the CRA’s rules regarding employee gifts and awards. It’s also essential to give material items instead of gift cards or cash. If you’re stumped on what to buy, consider just asking your employees what they want. It may ruin the surprise, but it helps to reduce tax liability.

References & Resources

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

What Do You Know About Gift Card Accounting?

Do your clients sell gift cards, issue them for promotional events, or…

Read more

Tips for Increasing Gift Card Sales

Every small business owner wants to generate more revenue — and gift…

Read more

Should Your Small Business Sell Gift Cards?

Selling gift cards can be a great investment for small business owners.…

Read more