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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.

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?

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?

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

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  • It sounds kind of like a job. Nobody will sue you over $20, practically – Script Kitty Apr 25 '16 at 13:15
  • The number is very small that will likely make this a waste of time to pursue on a legal side. I just want to be sure that what i am doing isnt illegal and if the government or something got wind it if i wouldnt end up getting some unrealistic fine for not declaring anything. i know im probably making a big deal out of nothing. just wondering where i stand – user1889580 Apr 25 '16 at 13:19
  • I think the worst thing is people might just see your website as bad. A gift card isn't bad, just make it clear what the reward is to the user. – Script Kitty Apr 25 '16 at 13:22
  • There isn't one body of law that applies everywhere in the world, so please say what your jurisdiction is, and add an appropriate tag. – Nate Eldredge Apr 25 '16 at 14:36
  • It's okay to give people things of value, whether or not they have given you anything useful. They may have to declare it as income, but you are not employing anyone. Are you asking whether you have to report such rewards to the tax authorities (jurisdiction matters: there's a US threshold)? – user6726 Apr 25 '16 at 16:52
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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, as explained in this answer.

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 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).

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