Tax, Payroll, Finance, Technology

Teacher Gifts From Students

Q. My question is: I work for a school. Sometimes parents gift money or gift cards at holiday time or for an appreciation event. Are these taxable. How about gift cards from a school committee (holiday drawing etc.) Even a child will offer a dollar in a card. If they are I am really upset. These are given from the heart, and not meant to be a burden. But I must know, as I’ve gotten different answers from different sources. thanks so much!

A. There are two things that come to mind in answering your question.  First, money given to a teacher from a child would generally not be considered taxable.  This would fall under the gift provisions of the IRS code.  Most children will give a $10 or $20 gift or gift card.  Unless the parent of the child is an employer of the teacher as well, there is probably no tax liability created by this gift.  If the child gives a large, extravagant gift to the teacher, it would be best to consult with a tax advisor regarding the potential liability issues in this case.

Let’s say the same class of students decided to be very efficient.  Instead of donating 25 or 30 different gifts cards or cash items to a teacher, they instead collected money and donated to the school.  The school was instructed to pay this to the teacher as a lump sum.  In this scenario, the gift idea is thrown out the window.  Now the money transfers as part of an employee/employer relationship and must be considered income because the school is the employer.  The employer will either need to withhold on the payment or “gross up” the payment and pay the taxes on behalf of the employee.  This is the same as providing gift cards to teachers in lieu of cash.  I wrote about that topic in another blog article here.

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Samuel Kerch, CPA

Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein.Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein.

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