‘O’ Faring Better Than ‘OK’… Economic Times Are Tough, but ‘O’ Magazine Doing Well… Oprah Gives Employees Lavish Gifts, including iPad, for Mag’s 10th Anniversary (video)
Posted By Vicki McClure Davidson on June 20, 2010
Talk show host Oprah Winfrey's 'O' magazine doing well... Oprah lavished gifts on employees
While many businesses in America are struggling to keep from sinking into the murky abyss of bankrupcy, things are apparently going peachy-fine at Oprah Winfrey’s O magazine.
I don’t think I’ve ever received a gift from an employer in honor of the company’s 10th anniversary (I vaguely recall a lunch pizza party at one job, so maybe that counts). So, yes, for most of us working shmoes, it’s admirable and enviable what Winfrey recently did for her publication’s dedicated employees.
Winfrey loves giving away expensive gifts, as we’ve witnessed with her presenting, with much hoopla, the giving away of Ugg boots, electronic devices, and free cars to total strangers — members in the studio audience of her talk show.
How she generously treats her employees appears to be no different.
However, the IRS will also be profitting from Oprah’s gift-giving.
From WalletPop, What’s the tax on Oprah’s iPad and $10,000 check for ‘O’ Magazine?:
These days, reaching your 10th anniversary in business is a big deal (trust me, my law firm just turned 10). Most companies celebrate by handing out pens, chocolates or other trinkets to their employees. But O, the Oprah Magazine, isn’t most companies. It’s a media powerhouse run by one of the most influential and wealthy women in the world. So you can pretty much count on Oprah to do something big to mark the occasion — and this year, she didn’t disappoint.
On Tuesday, Oprah stopped by the magazine to thank her employees. And she left a little something behind: an Apple iPad, a leather iPad case with the staffer’s initials, and a check for $10,000 for each employee. The gifts were given regardless of how long the employees had worked for the company. Awesome, right?
In January 2011, each employee will get another gift from Oprah: a form W-2 reporting the value of those gifts. The total value of the gifts was approximately $11,000, which includes the check, the iPad (valued at between $500 and $800) and the case (similar cases retail for about $80). That amount must be reported as taxable income to the employees.
I know what you’re thinking … but it was a gift, right? It doesn’t matter.
With respect to the $10,000, cash or checks given to employees are considered compensation as far as the Internal Revenue Service is concerned. In other words, employers don’t really give “gifts” to employees — they just pay them a little differently. That means the gross amount of the gift or bonus must be included in the employee’s income for tax purposes and employers must withhold the proper amounts for income tax, Social Security and Medicare. There is an additional cost to the employer for matching FICA contributions.
What about the electronics and the leather case? The rules for non-cash gifts from employers to employees vary depending upon the type and value of the gift. Small gifts that are considered de minimis (that’s Latin for “about minimal things” — or in other words, small potatoes) from the IRS are not considered taxable. This generally covers the odd fruit basket or engraved pen offered to employees as thank you gifts. Non-cash gifts, however, that are clearly not de minimis, must be reported. The hottest electronic item this season is likely not to qualify as de minimis — and will likely have to be reported as taxable income.
Hopefully, the employees at O have good tax professionals on hand who will advise them about the tax consequences of their new toys. Assuming a marginal tax rate of 28% (a pretty fair assumption of the average pay rates at the magazine), the tax bill for those items could reach over $3,000.
Still, nice work if you can get it. Hey, Oprah, call me!
A fun music remix of the historical “You get a car!” Oprah Winfrey show that aired in 2004. Every member of her studio audience — 276 people total — received a free car that day.
In 2007, the extremely funny late-night talk show host Craig Ferguson, while making predictions on winning sports teams, declared, “No one beats Oprah, and everyone gets a free car.”
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