04:05
ISSUE 2
What is Cash? Some managers may think particular employee awards, such as gift cards, are not cash because they are not given as a cheque or in hard currency. But, to the IRS, cash is anything that is spent like real cash. So, gift certificates, gift cards, vacation or meal vouchers, and those cheques or additional direct deposits are just a few examples of cash, or cash equivalents. When teaching Payroll courses, I often hear that management thinks gift certificates or gift cards requiring merchandise to be purchased and that are not redeemable for cash are non- taxable. This is not true.
Gift certificates and gift cards generally would not qualify as excludable since they are considered cash equivalents, even if the property or service bought with the gift certificate or gift card (if provided in kind) would itself qualify as a de minimis fringe benefit. The IRS reinforced this interpretation when it determined in 2004 that a holiday gift coupon with a face value of $35 that was redeemable for merchandise at several local grocery stores was not a de minimis fringe benefit, even though the coupons could only be used once, and any unused portion was forfeited. After years of physically distributing hams, turkeys, and gift baskets, which are specifically excluded as de minimis fringes in the IRS regulations, an employer changed to distributing the coupons with a maximum of $35, to be used at designated stores for purchasing such items. “Since these rules have been in place some high- profile organisations including those in the public sector have had HMRC reviews and been found to have made mistakes resulting in large settlements with HMRC.”
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