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Gift Cards to Temp Employees

I know that Gift Cards are taxable income to employees and non employees but what do you do for temporary employees providing service through a temp agency? Do you report the gift to the agency so they can add to the employees wages or do you require the temp to sign off on an acknowledge of the Gift and complete a W9 form, and then if gifts exceed $600 you give a 1099-NEC?

Comments

  • The temp agency should be notified of the gift card and should include the amount in the employee's wages. See IRS Publication 15-B page 3
    Provider of benefit. You’re the provider of a fringe benefit if it is provided for services performed for you. You’re considered the provider of a fringe benefit even if a third party, such as your client or customer, provides the benefit to your employee for services the employee performs for you. For example, if, in exchange for goods or services, your customer provides daycare services as a fringe benefit to your employees for services they provide for you as their employer, then you’re the provider of this
    fringe benefit even though the customer is actually providing the daycare.

    The temp employee is not an independent contractor, but an employee of the temp agency. However, the customer company may also be an employer under the common law. If the benefit is not considered provided by the temp agency, then the customer employer should withhold or gross up taxes and issue a W-2.