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» From: Lilburn, GA Dear TaxMama, Say we purchase sereral items (PCs, Palm handhelds, cell phones etc.) and give them to employees (and they become the property of the induvidual employee. Would/should we consider the FMV of the items awarded to the employee as compensation and therefore have to include the value in their W2's? Thank You for your (as always, stellar) assistance. Ed Dear Ed, Small, inexpensive items, you can give away with no tax consequences. However, you are talking about costly items. You can look at this two ways First: Are these awards/rewards to employees for their service or loyalty? If so, then, yes, you must add them to their wages or report them as other income. Second: Are these tools you give the employees that are critical in the performance of their jobs? Frankly, all tools like this tend to become worthless in about two to three years. I would not 'give' them to the employees. Perhaps you could retain ownership of these tools, with the requirement that the employees return them when they leave your employ? Have them sign a voucher for those tools. If they leave, without returning them, then, report the FMV as income to them. If they stay there for more than five years, you can let them keep them at the depreciated value - which would be zero. That's just my recommendation. Best wishes Eva Rosenberg Your TaxMama Click Here for TaxMama's Honor System |
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