- Days left

What's the tax on Oprah's iPad and $10,000 check for 'O' Magazine?

oprah ipad o magazineThese 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!

Increase your money and finance knowledge from home

Intro to Retirement

Get started early planning for your long term future.

View Course »

Economics 101

Intro to economics. But fun.

View Course »

TurboTax Articles

What is IRS Form 8824: Like-Kind Exchange

Ordinarily, when you sell something for more than what you paid to get it, you have a capital gain; when you sell it for less than what you paid, you have a capital loss. Both can affect your taxes. But if you immediately buy a similar property to replace the one you sold, the tax code calls that a "like-kind exchange," and it lets you delay some or all of the tax effects. The Internal Revenue Service (IRS) uses Form 8824 for like-kind exchanges.

What are ABLE Accounts? Tax Benefits Explained

Achieving a Better Life Experience (ABLE) accounts allow the families of disabled young people to set aside money for their care in a way that earns special tax benefits. ABLE accounts work much like the so-called 529 accounts that families can use to save money for education; in fact, an ABLE account is really a special kind of 529.

What is IRS Form 8829: Expenses for Business Use of Your Home

One of the many benefits of working at home is that you can deduct legitimate expenses from your taxes. The downside is that since home office tax deductions are so easily abused, the Internal Revenue Service (IRS) tends to scrutinize them more closely than other parts of your tax return. However, if you are able to substantiate your home office deductions, you shouldn't be afraid to claim them. IRS Form 8829 helps you determine what you can and cannot claim.

What is IRS Form 8859: Carryforward of D.C. First-Time Homebuyer Credit

Form 8859 is a tax form that will never be used by the majority of taxpayers. However, if you live in the District of Columbia (D.C.), it could be the key to saving thousands of dollars on your taxes. While many first-time home purchasers in D.C. are entitled to a federal tax credit, Form 8859 calculates the amount of carry-forward credit you can use in future years, not the amount of your initial tax credit.

What is IRS Form 8379: Injured Spouse Allocation

The Internal Revenue Service (IRS) has the power to seize income tax refunds when a taxpayer owes certain debts, such as unpaid taxes or overdue child support. Sometimes, a married couple's joint tax refund will be seized because of a debt for which only one spouse is responsible. When that happens, the other spouse is said to be "injured" and can file Form 8379 to get at least some of the refund.

Add a Comment

*0 / 3000 Character Maximum