Being a business owner is complicated – even giving gifts and awards to your employees has taxable consequences that must be properly handled. Gifts, awards, and cash-related bonuses given to employees must be considering during tax season to avoid unwanted consequences for both the worker and business owner. Cash or near-cash is always treated as a taxable benefit to your employees, no matter the amount; consequently, you should keep tax treatment in mind when planning to offer gifts to employees.
As a CPA accountant in Calgary with extensive experience in financial statement preparation, tax compliance and planning, audit and assurance, and contract compliance audits, Edison Wen has established himself as a tax authority whose advice can be trusted.
Read on to learn some tips for compliant tax treatment gifts and awards from a qualified CPA accountant in Calgary!
Important definitions to consider with your gifts, awards, and bonuses:
The following definitions must be understood when managing your business’ taxes.
- A “gift” must be for a special occasion. This includes religious holidays, birthdays, wedding, or when an employee experiences the birth of a child.
- An “award” must be for employment-related excellence. This can include exemplary customer service, or instances where an employee’s suggestion was a success. An “award” refers to the employee’s broad-scale contribution to the workplace, whereas a “reward” refers to a specific recognition of job performance, and is taxable.
- Gift cards are classified as “near cash,” and are considered taxable benefits in the same way as cash.
- “Non-cash” gifts and awards can amount to a total value of $500 or less each year. Any non-cash gifts exceeding this amount must be considered as part of the employee’s income.
- Every five years, an employee may be eligible for a non-cash “long-service or anniversary award” that is considered tax-free, so long as it does not exceed $500.
- The value of all gifts will be assessed according to the fair market value and GST/HST impact, rather than its’ cost to the employer.
These six definitions should help you comply with tax protocol in the upcoming season. You can learn more about tax compliance at http://edisonwencpa.ca/services/tax-planning-and-compliance/ or contact Edison Wen CGA CPA accountant in Calgary today at (403)-800-3303!