How is a $500 cash gift handled for a caregiver? If caregiver was an employee (w-2 given out) I understand it is reported as taxable income. If caregiver is an independent contractor (1099)? or Paid through a contract service agency? (Tip income) Are there any requirements on my end reporting for last 3 examples.
tks all
bw
Sure. The technical term for a gift to an employee is "bonus", and that goes on the W-2 just like any other compensation for the employee's labor. If it's a thing rather than cash, then the fair market value goes on the W-2.
It might be different -- emphasize "might" -- if you could make a credible case that the gift was a true gift and you would have given exactly the same gift to that same person if he or she was not your employee. Realistically, I think that would be awfully tough to establish.
Same thing. I'd be careful, though -- contractors are not customarily paid bonuses. Just doing that would probably not be enough to cause the IRS to reclassify the person as an employee, but if there were other factors going that way then this one might be enough to tilt the balance.
If you do that, the contract service agency is responsible for withholding and reporting, so it's not your problem. But they will probably take their customary percentage out of it, so try to negotiate with them in advance for the whole amount to go to the employee.
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