If you give a favorite employee a big check at Christmas, you might consider it a gift, but the IRS will likely consider it income. Another example would be, that you have an employee this is getting married, so you purchase that expensive food processor and think that you made a gift. Nope! The IRS may just say that the value should be added back to the W-2.
It’s hard to believe, but these examples could be true even if the employee and owner are family. In one case, the IRS said payments to an owner’s daughter (who was an employee) were for the past services, not a gift.
If you have the occasion to make a gift to an employee, talk to us so that we can keep the IRS off of your back.
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