While gift cards seem like a quick and easy alternative to more personalized gifts, the Internal Revenue Service considers gift cards to be additional compensation, so it's taxable income. That's right. Employees will have to declare money, gift certificates or gift cards -- pretty much anything that can be converted into cash -- with their usual taxes.
Consider giving one of these non-taxable gifts (as defined by the IRS' Employer's Tax Guide to Fringe Benefits) instead:
• Any item that costs about $25 or less is not taxable. There are a wide range of office and personal gifts available that can be customized for your company or for individual employees.
• For the foodies in your company, consider an edible gift such as a holiday ham or baskets of assorted items like chocolate or coffee.
• Don't forget to consider throwing a holiday party for your employee and their guests. The cost of throwing a party for employees is tax deductible (with some caveats).