It is that time of year when employers want to provide gifts to their employee’s. It is important to note what the IRS says about employee gifts and in my opinion it isn’t very pretty or realistic.
The IRS says that if, as a means of promoting goodwill, an employer makes a general distribution of hams, turkeys or other items of merchandise of nominal value (the IRS says nominal is $25) at Christmas or other comparable holiday (I assume they mean Thanksgiving), the value of the gifts is not included in the income of the employee. However, if the employer distributes cash or gift cards or other items readily convertible to cash, the cash value of such gifts is additional wages regardless of the amount or value.
So there you have it, If you are an employee and are suddenly wondering why your cheap old employer gave you a turkey this Thanksgiving it is because your employer’s accountant explained to them that they could not give you a cash gift of $100 or even $50 without adding it to your wages and applying payroll tax, but they could give you a turkey.