Are GameStop's Gifts to Managers Taxable Income?
Video game retailer GameStop has announced that managers at each of its 6,500 stores nationwide will receive free PlayStation 4 and Xbox One consoles before the year is out.
These consoles are by no means cheap, running between $400 and $500, but GameStop may be gifting the consoles as a way to educate their management on the much-anticipated products, reports Forbes.
These gifts may be work-related, but are GameStop's gifts technically considered taxable income?
Free Consoles for Managers
GameStop managers were the first to leak the news -- on Twitter -- about their employer promising them free consoles, although the offer of the PS4 and Xbox One consoles has since been confirmed with GameStop's PR, reports Neowin.
Qualifying managers will purportedly receive the PS4 and XBox One consoles on their respective launch dates, in addition to seven PlayStation games -- a sweet deal that is proof that employee benefits can improve morale if not consumer good will.
But while GameStop managers may be giddy about the promised "gift" from their employer, they may not realize the potential tax implications.
Gifts From Employers Are Typically Income
Business owners should be aware, and may want to educate their employees as well, that gifts from an employer to an employee are not "gifts" for tax purposes. Instead, they are counted as income.
That means that while GameStop managers may be getting two free consoles and a handful of games, they will likely have income taxes taken out of their paycheck for the approximately $1,300 of "income" they've received.
Employers like GameStop may be able to avoid passing on tax liability to their employees by writing the gifts off as "employee achievement awards." But the awards must mark something meaningful (e.g., an important milestone like 10 years of service with the company) and not a smokescreen for compensation.
No Holiday Gifts?
Small business owners can still give non-taxable gifts to their employees, like a festive ham, a bottle of mid-priced wine, or tickets to a concert. But even something like a gift certificate for a turkey could be considered income.
Santa had better bring the GameStop managers some tax prep software this year, because the gratuitous PS4 and an XBox One are likely too expensive together to be considered a tax-free gift from an employer.
Tax consequences aside, you can't play FIFA 14 on a Christmas ham.
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Related Resources:
- GameStop managers to receive PS4, seven games (Joystiq)
- To Give or Not to Give: The Holiday Bonus (FindLaw's Free Enterprise)
- GameStop Settles CA Lawsuit With $15 Refund, New Warnings (FindLaw's Common Law)
- Transferable Employee Stock Options (FindLaw)
