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Payroll FAQs

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We have a rewards program here, where employees can earn points. They turn the points in for gift cards. Here are a few ways they can earn rewards. Annual flu shot, Annual Medical exam, annual dental exam, keeping track of steps with a fitbit tracking device and annually employees get points on their anniversary. They can save up the points and redeem for gift cards of their choice. For example: an employee may have saved up 600 points and turn it in for a gift card for $60. Would this be considered discretionary or non-discretionary? And if non-discretionary, how would we include it in their income?

This is non-discretionary money. IRS says we are required to tax workers on any form of compensation considered cash or cash equivalent. So, this must be taxed as regular W-2 wages. Many payroll processors will gross up the amount and others use a special code in their software to increase the taxable total without actually paying the employee again for the amount of the gift card.
Here is a helpful link: https://www.patriotsoftware.com/payroll/training/blog/are-gift-cards-taxable-income-gift-from-employer/
Let me know if I can assist you further. Have a great day!
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