Paul Thomas, CPA <paulthomascpapc[at]bellsouth.net> wrote:
- quote -

I see the point now.

Yes, if you get a widget worth $100 and your employer pays
the IRS $50 in additional withholding (that didn't come out
of your paycheck), then there's $150 of income.

But if you get the widget and your employer withholds the
$50 from your paycheck, there's $100 of income.

And if you get the widget and your employer doesn't withhold
(and remit to the IRS) any additional amount, then he did a
wrong thing, but there's still only $100 of income.

Seth

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Seth Breidbart" <sethb[at]panix.com> wrote

- quote -

Not if that is considered compensation. There would have to
be a gross-up for the taxes. Look at it this way, if your
net check was $1500, what does your gross pay need to be?
Now, it doesn't matter if that pay was received in cash,
check, free rent, the use of a vehicle or 150 - $100
widgets. It's the same methodology the IRS would take to
gross up payments it deems to be wages.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

- quote -

What are you talking about? If my employer gives me a
widget that's worth $100, I pay taxes on $100. It doesn't
matter if the "Suggested Retail Price" is $100 or $500, what
matters is the Fair Market Value.

Whether I'm in a 20% or 50% tax bracket also doesn't affect
the Fair Market value; the widget is worth $100, because
that's the price that Joe's Widgets sells thousands of them
at.

- quote -

If the employer bought it at something resembling a retail
price, then that could be Fair Market Value. What if the
employer got it "free"? (For instance, an advertising agency
got stuff from a client.)

- quote -

"Fair" (market value) is defined in the IRC.

Seth

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting posts > << to this newsgroup as well as our anti-spamming policy > << are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Seth Breidbart" <sethb[at]panix.com> wrote

- quote -

Remember, in the market place it's after tax, so don't
forget to gross it up for Social, Medicare, Federal and
State.

- quote -

They should be based on what the employer paid for the item
(that's the net pay), grossed up for taxes.

There shouldn't be any reason to take a mark-down from that
because you don't think the gross amount is fair.

Don't take the award. Problem solved.

--
Paul A. Thomas, CPA
Athens, Georgia

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Dennis Marks <12ckdulnr0g89a6[at]corp.supernews.com> wrote:
- quote -

Well, the same principle applies, but in practice it's more
difficult to convince anyone the W-2 is wrong. And it's
impractical to try to get back any FICA paid on that income.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"Hank Murphy" <hmurphy[at]earthlink.newt> wrote:

- quote -

First thanks for all of the informative replies!!

I should have noted that my son's "income", for the mentioned
performance awards, are included with his income on the W-2.

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Arthur Kamlet wrote:
- quote -

The employer is showing it on his w2 as income not a 1099.

--
Dennis M. Marks

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

I would add a suggestion to the foregoing advice. Are the
"prizes" reported via W-2 or 1099?

If by 1099, is the originator of the 1099 his employer, or
is it a company which does marketing promotions and similar
activities? If so, one approach is to contact the promoter
and ask for the 1099s to reflect Actual Retail Value (ARV)
rather than list price.

Otherwise, the suggestions on challenging the 1099 amount on
the return sound like the best approach.

Hank Murphy
speaking only for myself

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

Paul Thomas, CPA <paulthomascpapc[at]bellsouth.net> wrote:
- quote -

When the item is a standard item for sale in the marketplace,
determining fair market value is easy.

- quote -

I don't understand that at all.

A hard drive lists for $250 and costs $100 on newegg. If
it's an award, the recipient should pay $125 in taxes (NYC
combined federal, state and city) on the "suggested retail
price" of $250? That isn't much of an award, is it?

Taxes should be based on the fair market value of the item
received, which _can_ be determined by looking at ads for
it, catalogs, etc.

Seth

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

don <notwantingspam[at]hotmail.com> wrote:

- quote -

He should gather proof of the actual fair market value of the
prize.

I assume the prize is reported to him by the employer on
Form 1099-Misc box 3? That's where it would usually be
reported.

He would write "See attached statement" on Form 1040 Line 21
and enter the fair market value of the gift.

On the attached statement containing his name/SSN/Form 1040
[Year]

Explanation of Form 1040 Line 21
Reporting Fair Market Value of Prize received from

[Name of employer and EIN]

Per Form 1099-Misc Box 3 $XXXX

less excess over Fair Market Value of Prize ( YYY)

Taxable Amount (FMV) $ZZZZ

Save your proof of FMV for when the IRS asks for it. Maybe
they never will.

__
Art Kamlet ArtKamlet [at] AOL.com Columbus OH K2PZH

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

don wrote:

- quote -

Since his employer has done the right thing by withholding
tax on the bonus (not a prize), there's nothing to be done.

Only if the employer would be persuaded to use a lesser
amount would anything be accomplished.

ChEAr$,
Harlan Lunsford, EA n LA
Thur, July 27, 2006

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

"don" <notwantingspam[at]hotmail.com> wrote

- quote -

It's going to show up on his W-2, and there isn't any
realistically acceptable procedure to deduct for conflicting
values of performance awards.

Now, the employer should be booking those to payroll at his
cost and grossing them up for taxes. So, an item that you
can ~buy~ at $100 on e-bay is in reality purchased with
after tax dollars, and when you gross that $100 up for taxes
it's somewhere north of $108 just for social security and
medicare. Add to that for the federal and state taxes (15%
fed, 5% state) and other such items and you could easily be
over $138 gross pay for that item you value at $100.

So don't discount the award as less value because it might
not be the case when you consider the gross up for taxes.

--
Paul Thomas, CPA
paulthomascpapc[at]bellsouth.net

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

don <notwantingspam[at]hotmail.com> wrote:

- quote -

Yes. That's the correct thing to do.

He needs to be able to support his values. Cutting out ads
from newspapers and catalogs, and printing out web pages
(recognized stores are better than eBay) should suffice.

Seth

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

My son works for a major computer reseller, as a salesman.
He has often won significant prizes, for meeting specific
sales performance goals.

While he enjoys those perks, I wonder if he is over-paying
the associated income taxes. His employer always without
taxes, as if the item was "gifted"to him at the suggested
retail value. Nearly always, one can find an identical item
for sale, ala Buy.com, Tigerdirect etc for a significantly
cheaper price (than he was taxed at).

My Question: Is there any way he can file his tax returns,
recognizing the tax value of those performance "gifts" at
current market value, vs the manufacturers suggested retail
value?

<< ================================================== ===== > << The foregoing was not intended or written to be used, > << nor can it used, for the purpose of avoiding penalties > << that may be imposed upon the taxpayer. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >