Gift cards of any value are considered taxable income to the recipient. Cash and tangible gifts are also taxable.

If you give a gift to a Principia employee, please provide the following information to Payroll: 1) the recipient’s name, 2) date of gift, 3) gift amount, 4) description of the gift, 5) organization number giving the gift, and 6) a copy of a receipt for the purchase.

The gift amount will be added to the recipient’s taxable wages. Consequently, the recipient is responsible for paying taxes on this gift, including federal, state, social security, and Medicare taxes. The department giving the gift will also be responsible for paying an additional 7.65% to cover Principia’s share of social security and Medicare taxes. If the recipient is no longer employed with Principia and has already received his or her last paycheck, the department is responsible for paying an additional 15.3% to cover all of the social security and Medicare taxes. 

The only exception to the taxation of gifts to employees is “a turkey, ham, or other item of small or nominal value at Christmas or other holidays.” A gift certificate, gift card, or cash will never be treated as a small or nominal value gift by the IRS. Any gifts of this sort need to be approved in advance by the unit head to maintain equitable treatment among employees and proper compliance with IRS regulation.

Contact Payroll or Sara Thorndike with any questions.