How to tax gift cards in payroll

This comes from employee tax forms, federal and state requirements, insurance requirements, and employee benefits. Here are some of the most common factors in determining employee deductions for gift cards in payroll:

• Federal taxes

• Social Security

• State taxes

• Local taxes

• Medicare

• 401(k) contributions

• Workers' compensation contributions

• Other forms of employee benefits

Whatever deductions you normally include with a specific employee, you must also include the amount of the gift card in terms of their gross earnings on the payroll.

Gift cards are considered a fringe benefit. Fringe benefits, also known as in-kind benefits, are benefits that a company or employer gives their workers in addition to their mandatory benefits, and yearly salaries.

Here are some other examples of fringe benefits:

• Medical, dental, and vision insurance

• A company car

• Educational assistance, such as tuition reimbursement

• Paid time off

• Life insurance

• Employee stock options

• Company gym memberships

• Reimbursements of childcare costs

• Free meals

• Employee development programs

• Employee discounts