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Learn the tax rules for employee gift cards and how Assembly’s new platform makes compliant gifting easy for HR leaders.
Employee recognition is a cornerstone of positive workplace culture, and gift cards have become a favored tool for celebrating achievements, milestones, and everyday excellence. Their flexibility, ease of distribution, and universal appeal make them a go-to reward for HR leaders. However, beneath the surface of this simple gesture lies a complex web of tax implications that, if misunderstood, can lead to compliance issues and costly penalties for both employers and employees.
This comprehensive guide will help HR professionals navigate the tax rules surrounding employee gift cards, avoid common pitfalls, and implement compliant, effective recognition programs. Plus, discover how Assembly’s new gift card platform can streamline your gifting process and ensure compliance.
Gift cards are versatile and appreciated by employees for a variety of occasions—thank yous, birthdays, anniversaries, retirements, and more. Assembly’s new gift card program enhances this experience with:
The IRS classifies gift cards as “cash equivalents.” This means that, unlike small tangible gifts (such as a mug or a box of chocolates), gift cards are almost always considered taxable income for employees—regardless of the amount or occasion. Even a $10 coffee shop card is subject to the same tax treatment as a $100 Visa gift card.
Key Point:
Gift cards must be included in employees’ taxable wages and reported on their W-2 forms.
The IRS allows certain small, infrequent gifts to be excluded from taxable income under the “de minimis fringe benefit” rule. However, gift cards are specifically excluded from this rule, no matter how small the value. The rationale is simple: gift cards are essentially the same as cash, and cash is always taxable.
Common Mistake:
Assuming a low-value gift card is “de minimis” and not reporting it as taxable income.
When you give an employee a gift card, you must:
This applies whether the gift card is for a holiday, a work anniversary, or a spot bonus. Failing to do so can result in penalties and back taxes.
Best Practice:
Work closely with your payroll and finance teams to track all gift card distributions and ensure proper tax withholding and reporting.
Assembly’s new gift card platform is designed to make employee recognition easy, compliant, and fun:
Assembly’s platform helps you stay compliant by tracking all gifts and making it easy to document and report taxable benefits.
Gift cards are a powerful tool for employee recognition, but HR leaders must understand and manage their tax implications. By following IRS guidelines, establishing clear policies, and leveraging tools like Assembly’s new gift card program, you can create a culture of appreciation while staying compliant.
Ready to make employee gifting easy and compliant? Schedule a demo with Assembly today!
Yes, employee gift cards are considered taxable income by the IRS and must be included in the employee’s wages, regardless of the amount.
No, gift cards are classified as cash equivalents and do not qualify as de minimis fringe benefits, even if the value is small.
Employers must include the value of gift cards in employees’ taxable wages, withhold appropriate taxes, and report the amount on the employee’s W-2 form.
Establish clear policies, document all gift card distributions, coordinate with payroll for tax reporting, and educate employees about the tax implications.
Get the foundational knowledge on creating an employee recognition program that boosts employee engagement and helps them feel valued.
Explore Guide
Yes, at Assembly, security is a top priority. Each quarter, we have ongoing security work that is everyone’s responsibility. While we maintain a strong security posture, it was important for us to prove to our customers that we do everything we claim to do. This led us to pursue a SOC 2 Type II report that would provide evidence of our compliance with industry gold-standard security practice.
There is study after study showing that employee recognition leads to increased engagement. This in return creates an environment where employees are happier and more motivated which increase productivity and reduces voluntary turnover significantly. In order to filled critical roles, companies tend to spend nearly twice the value of an annual salary. Assembly is an investment in your employees that supports your bottom line.
Yes, we will offer contracts for companies with longer-term agreements to help larger customers have more certainty around future costs.
The minimum agreement term is a 12-month subscription.
We do and for FREE! Any new customer needing further support to get started with Assembly to ensure you're set up for success can request custom onboarding support. Improving your employee experience is about much more than just using our amazing software; it’s about transforming your business to create a workplace that people love. That’s much easier to do with the personal support and advice from our passionate people experts.
At the time of redemption (when your employees exchange their points for a paid reward) you'll pay face value. If a reward is a $10 Amazon gift card, your cost will be $10. All paid rewards are billed for on a monthly basis.
The good news is that you don't have to pay for rewards upfront because we only charge you when points are redeemed, not when they're earned.
We offer discounts or educational or charitable organizations. In order to secure a discount, you'll first need to book a demo with a customer support specialist.
For all other organizations, we are willing to consider longer-term agreements in exchange for discounts. To set up annual plans or longer, you will need to book a demo with a customer support specialist.
If you're on a month to month plan, you can go here and cancel anytime. If you're having concerns or need help setting up your account for success, you can always book a demo with a customer support specialist.
If you're on a longer-term custom plan, you'll need to reach out to your customer support specialist to cancel your account or email us at support@joinassembly.com.
Great question! You can customize your core values to match your organization's to boost and track alignment. You can change your currency from the 🏆 emoji (our default) to any emoji of your choice. You can swap our logo for your own. You can also set up company culture rewards such as, "Lunch with the CEO," "Buy a book on us," and so much more!
While we recommend a peer to peer set up where anyone in your organization can give or receive recognition, you can set up Assembly however you want. If you need to limit the people who can give or receive recognition, that's perfectly fine and can be done from your Admin, here.
Assembly connects to the tools your employees use every day to offer an easy, seamless experience with minimal change management.
Assembly has integrations with HCM/HRIS systems like ADP, Google, Office 365, and Slack. We also integrate with communication tools like Slack and Teams so you and your employees can access Assembly wherever they work now.
That depends on the company's permissions set up. That said, over 90% of the employees on Assembly's platform are recognized on a monthly basis. That means nearly every employee across all of our customers are receiving regular recognition from their peers, managers, or leadership. We're extremely proud of this.
They are not required. You can use Assembly without having rewards set up. However, we don't recommend it if you intend to have a high adoption and usage rate. You can always keep the costs down by offering internal culture rewards that are fulfilled by you internally.
No, you can remove allowances from anyone or everyone. It's up to you but we do recommend using points whether they're worth a real dollar value or not. Companies that use points have a much higher engagement rate even if those points don't exchange for real dollars.
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