How should gift certificates purchased for employee gifts be categorized?

Thank you for posting your concern here today, @melissa-bellasgl. I'm here to ensure you can categorize the gift certificates for your employees in QuickBooks Online (QBO).

The best way to track your gift certificates to employees is to create a bonus paycheck. Let's start by adding the Bonus pay type to the employee profile.

1. Select the Payroll menu, then select the Employees tab.
2. Select the employee's name.
3. In the Employee details section, select the pencil icon next to Pay.
4. Select Add additional pay types. Then select Bonus.
5. Select Save.

1. Select Workers, then select Employees.
2. Select the Run payroll drop down, and select Bonus only.
3. Select the applicable settings for the bonus paycheck.
4. Click Continue.
5. Select the employee. Then enter the amount in the Bonus field.
6. Select the edit (pencil) icon beside "Payroll options".
7. Select the payroll options you want. Click Apply.
8. Select Preview Payroll, then Submit Payroll.

You can also find these instructions by visiting this article.

Additionally, after creating bonus paychecks, you can also match them with the checks you'll give to your employees and also be posted to your bank.

Feel free to get back to this thread if you have more questions about tracking gift certificates or need some QuickBooks tips. We're around to back you up always. Have a wonderful day!

@melissa-bellasgl 

If the gift cards are "regularly" received by employees, they are to be included in the employee's wages and subject to withholding and FICA.  If they are de minimus fringe benefits, they can be deducted and not reported as income to the employee. 

Here is the IRS's position on what constitutes de minimus fringe benefits:

In general, a de minimis benefit is one for which, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical. De minimis benefits are excluded under Internal Revenue Code section 132(a)(4) and include items which are not specifically excluded under other sections of the Code. These include such items as:

• Controlled, occasional employee use of photocopier
• Occasional snacks, coffee, doughnuts, etc.
• Occasional tickets for entertainment events
• Holiday gifts
• Occasional meal money or transportation expense for working overtime
• Group-term life insurance for employee spouse or dependent with face value not more than $2,000
• Flowers, fruit, books, etc., provided under special circumstances
• Personal use of  a cell phone provided by an employer primarily for business purposes

In determining whether a benefit is de minimis, you should always consider its frequency and its value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation.

Whether an item or service is de minimis depends on all the facts and circumstances. In addition, if a benefit is too large to be considered de minimis, the entire value of the benefit is taxable to the employee, not just the excess over a designated de minimis amount. The IRS has ruled previously in a particular case that items with a value exceeding $100 could not be considered de minimis, even under unusual circumstances.