tax-law
Are there legal obligations when giving rewards?
<p>I have a website where i would like to offer an incentive for people to contribute content. Once you reach a predefined amount of content that has been approved and added to the site you can earn a reward. For example, submit 10 guides that get approved, you earn X amount of dollars toward your total earnings. Once you reach a threshold of say $20 you unlock the ability to claim the reward. </p>

<p>Is this ok to do or do i need to declare this somehow? If i just offer something like a paypal transfer of money is this considered employment?</p>

<p>If the above is true, would it be negated if i offered a gift card? For example, one you get to $20, you can claim a $20 amazon gift card. Being what they are a gift card is a gift. Of course in this case you must earn your gift, but is this a legal way to get around things? </p>

<p>I run this website as a hobby. These rewards will be coming from my own pocket and not a registered company.</p>

<p>Assuming you intend to deduct the "rewards" as a business expense: No matter what words you want to use, what you are describing is compensation for work.  In the United States you are required to declare non-employee compensation over $600 to individuals and certain entities, <a href="https://law.stackexchange.com/a/4704/10">as explained in this answer</a>.</p>

<p>If you do not intend to deduct the rewards as a business expense, in which case they truly are "gifts," then if you are a United States entity <a href="https://www.irs.gov/Businesses/Small-Businesses-&amp;-Self-Employed/Frequently-Asked-Questions-on-Gift-Taxes" rel="nofollow noreferrer">you only have to declare and pay gift taxes when the amount given to another single entity exceeds the annual exclusion amount (which is presently $14,000)</a>.</p>
