Entertainment news is abuzz with the IRS taking action to publicize the tax implications of award show gift bags. Here are some facts to remember, gleaned directly from the IRS and Academy of Motion Pictures press releases:
1. The Academy voluntarily approached the IRS in order to clear up the tax implications of their (substantial and pricey) gift basket.
2. In April, the Academy board voted to discontinue the practice of thanking their presenters and performers with gift baskets.
3. Since the Academy did not want their presenters to get hit directly with any retroactive taxes from past baskets, the Academy worked with the IRS on an agreement to take on past tax obligations (through 2005). However, recipients of this year’s baskets will be responsible for any taxes
4. Other external gift bags and freebie “shopping suites” seem to also be included in the IRS’ taxable income umbrella. So companies setting up gifts in conjunction with an event, but not directly coming from the event producers, will also need to consider the implications of this announcement.
As for me, it looks like my major yearly research (and publicity!) project will be going the way of the dodo. (IRS news release)