GLOBAL PAYROLL MAGAZINE
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“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.”
The IRS said that these gift coupons were not excludable from income even though the property bought with the coupon might be excludable as a de minimis fringe. The cards themselves, according to the IRS, have a “readily ascertainable” value, and accounting for them, therefore, is not unreasonable or impractical. When asked to prove this, I point the employer to several IRS publications and documents. Publication 15 – Circular E, Publication 15-B, Fringe Benefits , and IRS Technical Advice TAM 200437030 , 4-30-04. IRS Publication 15-B, Fringe Benefits, is an excellent source on all areas of taxable and nontaxable employee benefits. Discussing cash, it states: Cash and cash equivalent fringe benefits (for example, use of gift card, charge card, or credit card), no matter how little, are never excludable as a de minimis benefit, except for occasional meal money or transportation fare. A key phrase in this statement is that cash, “no matter how little,” is not excludable. This proves to our employers that IRS rules state that small amounts are no exception. What else does the employer need?
As I have said throughout my career, the rule to remember is: “Cash is cash, and cash is taxable.”
Author: Fred A. Basehore, Jr., CPP
Over the past five decades, Mr. Basehore has leveraged his extensive Payroll experiences to the benefit of his employers and the
overall Payroll community. Formerly, Fred was Sr. Director of Payroll Tax & Compliance for Guidehouse Inc., and this followed several years at KPMG’s employment tax group. As an active member of the former American Payroll Association, Fred - that organization’s Payroll Man of the Year in 1992 - traveled the country speaking and teaching Payroll professionals about tax compliance and other key Payroll issues. Currently, he is the owner of F.A. Basehore & Associates, offering Payroll/Payroll Tax Consulting Services. Contact Fred by email:
fabjrcpp@yahoo.com Or call +1 717 279 8448
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