My employer gifted me an iPod Touch and then assessed a taxable gift value of $600. What do I do?

BankerManUSA: My employer gifted me an iPod Touch and then assessed a taxable gift value of 0. What do I do?
The 16GB 2nd Generation iPod Touch retails from Apple for $ 299.00. It has never been higher. There are no service plans, or any additional costs, and the gift didn’t come with any extras. How do I/Can I argue the difference in the value of the taxable gift assessment?

Answers and Views:

Answer by v b
You had the opportunity to decline the gift. You didn’t, so it’s going to be added to your W-2. At a 15% tax bracket, that’s $ 45 in tax.

By the way, your employer cannot “gift” you anything–it’s considered compensation when it’s more than a $ 10 turkey at holiday times.

Answer by travelguruette
Gifts are not taxable. Awards or bonuses are. You can find the actual costs out there and claim it yes but you must have proof to back it up.

Answer by Fizgig
No one doubts that the iPod was compensation. The question is how much–you say $ 299 at most, and your employer says $ 600. The first thing you need to do is double-check that at the time the iPod was given to you, it was retailing for $ 299 (or whatever). SAVE documentation of that fact. Once you’re absolutely sure about the iPod’s value, here is what you need to do:

First, consider the fact that the employer will get a deduction in the amount of the iPod’s value. Therefore, the employer will wrongly claim a $ 600 deduction with respect to the iPod, thereby decreasing the employer’s taxable income. If done intentionally, overstating a deduction is a form of tax fraud potentially giving rise to a penalty in the amount of 75% of the understatement of tax resulting from the fraud. What’s more, the employer is expecting you to bear the burden of that overstatement because while his deductions increase as a result of the overstatement, your taxes increase.

So your goal here is to accurately report the value of the iPod as income ($ 300 or whatever), and get the employer to do the same.

The first step should be to bring this to the employer’s attention, gently and politely. If the employer says “whoops” and reassesses the income, problem solved. If you get resistance, that’s when it’s time to involve the IRS. Call the Office of the Taxpayer Advocate (number online), and explain that you don’t want to overreport your income and you are worried that your employer might be underreporting his. They will have step by step instructions for you, because they deal with this kind of thing all the time.

Don’t tell your employer you’re calling the IRS. Ultimately you may be told to report the lesser value on your return and submit a written explanation of why you’re doing so. In the end (and this may be 2 years from now when the IRS gets around to it), the IRS would ask you both to clarify.

If it gets to that point, make sure you have retained documentation that at the time of the transfer, iPods were not valued at $ 600. Save something from the Apple website or a store showing that in fact, iPods were selling for far less.