Are gift cards taxable income to employees?

I did some research on the question of are gift cards taxable income to employees a few years ago and what I found was not great. Any gift with a value over $50 (they said it could be stretched to $75) was taxable - even when for a catalogue where the employee chooses their item. Since it was my employer's preference to give gift cards as opposed to cash bonuses, we ended up having to add the value to their wages so they would be taxed appropriately. We couldn't keep track of someone who received one, two, or ten of these cards to know when they should be taxed.

This falls into the category as Base Ball Tickets that you might award to your employees.

IRS Publication 463 - Gifts
http://www.irs.gov/pub/irs-pdf/p463.pdf

Here is a link to the following text:
http://www.irs.gov/publications/p15b/ar02.html

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De Minimis Meals

You can exclude any occasional meal or meal money you provide to an employee if it has so little value (taking into account how frequently you provide meals to your employees) that accounting for it would be unreasonable or administratively impracticable. The exclusion applies, for example, to the following items.

•Coffee, doughnuts, or soft drinks.

•Occasional meals or meal money provided to enable an employee to work overtime. However, the exclusion does not apply to meal money figured on the basis of hours worked.

•Occasional parties or picnics for employees and their guests.

This exclusion also applies to meals you provide at an employer-operated eating facility for employees if the annual revenue from the facility equals or exceeds the direct costs of the facility. For this purpose, your revenue from providing a meal is considered equal to the facility's direct operating costs to provide that meal if its value can be excluded from an employee's wages as explained under Meals on Your Business Premises, later.

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You may also find additional guideance related to employee appreciation awards.

Keep the cards at or below the limit. If you have a top performer who receives multiple rewards during the year, you might need to track them for W-2 inclusion depending on the conclusion.

It would be great if people saying they did research could post a link that backs up their conclustion the cards do not fall into the deminimis category.

If your company has a plan in place that documents employee appreciation awards given by their manager that might include such cards and all the IRS limitations are considered and followed, and it is for the benefit of the business, then you should be okay. It would be to your benefit to pay your tax specialist to do some research to verify. The Code does not cover all types of gifts or employee awards, so you will need someone to hunt through the regs or IRS notices online and find examples.

Disclaimer: This post is for discussion purposes only does not constitute tax advice and you should seek professional advice from a qualified tax professional.