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Gifts to employees are a traditional way to thank people important to your business, but the IRS says certain types of gifts are taxable, and making sure you follow the rules can avoid a spoiler later. The good news is all gifts and awards to employees are deductible expenses for employers.Taxable Income to EmployeesAll cash or gift cards redeemable for cash are taxable to the employee, even when given as a holiday gift. Likewise, monetary prizes, including achievement awards, as well as non-monetary bonuses like vacation trips awarded for meeting sales goals, are taxable compensation – not just for income taxes, but also for FICA. Withholding applies.
Money Services Businesses (MSBs) and their employees who conduct money order sales and money transfer transactions must comply with all anti-money laundering laws and regulations that apply to them. Money Laundering Overview Money laundering is the attempt to conceal or disguise the nature, location, source, ownership, or control of. Transferring employees were not so lucky. The IRS now classifies any household goods or final move reimbursements paid directly to them or paid on their behalf as income subject to Federal income tax. Companies have had to decide how to treat this newly taxable relocation benefit.
On the other hand, non-cash gifts of minimal value, such as a holiday turkey, mostly are not taxable for employees if they are under $75 per year. Gifts worth more than $75 are taxable. Gifts awarded for length of service or safety achievement are not taxable, so long as they are not cash, gift certificates or points redeemable for merchandise.