Overtime and Tax Implications of Year-End Bonuses and Holiday Gifts

Document created by 1002070 on Nov 18, 2014Last modified by 1002070 on Jan 29, 2015
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The holidays are fast approaching! 

 

As employers consider employee holiday gifts and year-end bonuses, it is a good time to review the IRS regulations on taxation and wage and hour laws on inclusion of bonus in regular rate.  Employer-provided gift cards, prepaid credit cards, year-end bonuses or money in any form are all taxable to the employee regardless of the amount.   Non-cash holiday gifts with a low market value to employees are non-taxable; for example, food gifts, theater tickets, or holiday parties.  For other examples that escape taxation, see http://j.mp/irs-fb.  

 

Discretionary gifts, such as holiday gift cards do not have to be included in pay for the calculation of regular rate for overtime.  However, year-end bonuses or other payments 

based on a prior announcement or that are based on attendance, production or efficiency must be included in pay, and will require recalculation of the regular rate for overtime purposes.

 

For information on discretionary bonuses and exclusions from regular rate, see elaws - FLSA Overtime Calculator Advisor.

 

 

If you have additional questions, please call CAI’s Advice and Resolution team at 919‑878‑9222 or 336‑668‑7746.

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