Gift Cards are Taxable
IRS rules on taxable income.
Per IRS Regulations, gift cards are taxable to the recipient and must be reported as income to the IRS. In addition, because the IRS considers them to be cash equivalents (see 2013 IRS Publication 15-B page 8), there is no de minimis value. All cash and cash equivalents must be reported on a tax return.
A gift card cannot be distributed to a student or other non-employee without a completed W-9 first being received. The department issuing the gift card will be responsible for collecting the W-9. To facilitate this process, you can find a blank W-9 form on the business office website southwestern.edu/businessoffice/ or you can contact Lori McBee or Paula Sutton to have one emailed to you. We recommend that you have blank forms available for recipients to fill out at the time they pick up their gift card.
If the recipient is an employee, the gift card amount will be added to the employee’s W-2 at the calendar year end, and both employee and employer portions of FICA taxes owed on the card amount will be charged to the issuing department. If the recipient is not an employee, the gift card amount will be reported on Form 1099-MISC. The Business Office will manually add gift card amounts to recipients’ W-2 or 1099.
Please collect the following information and submit to Jennifer Martinka in the Business Office as quickly as possible after the gift cards have been given out.
- Recipient Name
- Gift Card Amount
- W-9 (for students and non-employees)
- Department account number where the gift cards were charged
We recommend that gift cards not be issued as prizes, awards, compensation, etc… without first contacting the Business Office. Please call us with any questions. Thank you for your cooperation and compliance with IRS regulations!