Is it legal and if not what would my first step be to resolve this.?

A contestant was held at our work and the prize stated a $5000 celebration. There are only 3 in my dept so we were taken to dinner a very elegant restraunt and then given a $1000 gift card. About 3 weeks ago the corp told us that it was againiest the rules to give us the cards and so they said that they would be added into our income at the end or the year. Well needles to say they did not do it that way. They put it as income on our check and taxed it which needles to say took my whole check. These cards say gift card on them and we could not use the for gas or paying our bills. Only merchandise. Myself and one other person are single parents and live paycheck to paycheck and have no funds to even travel to work,pay bills and with no overtime we can not replace this income to pay our bills because of no overtime available. So is this legal,it was a gift that turned into a nightmare.

So in effect your employer paid you with a "gift card" instead of money?

Contact your State Employment Commission for Payday Law violation regarding the improper manner in which you were paid. Your employer should have given you the "choice" of keeping the "gift cards" or surrendering them so they could (and should) still issue you your paychecks.

Good Luck.

what does it matter if they added this to your income now or at the end of the year? you still have to pay the same tax on it regardless of timing. you could have refused the prize.

I don't see anything that is not legal. But I will say, it was handled very poorly by your company.

Have you started a conversation with your HR department? I would start there if you haven't.