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Forums » Topic Forums » Benefits & Compensation » Prepaid cards tax-exempt?
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Prepaid cards tax-exempt?
posted at 2/1/2012 5:08 PM EST
on Workforce Management
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Posts: 18
First: 10/7/2011 Last: 11/8/2012 |
A question as posed by one of our readers. Any thoughts? HI, I just read your article regarding pre-paid cards as rewards to employees. How is this reward to employees exempt from the IRS De Minimis Fringe Benefit rule? Karen Butler HR Business Partner |
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Re: Prepaid cards tax-exempt?
posted at 2/1/2012 5:38 PM EST
on Workforce Management
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Posts: 148
First: 9/29/2011 Last: 12/10/2012 |
From the IRS site: "Cash or cash equivalent items provided by the employer are never excludable from income. An exception applies for occasional meal money or transportation fare to allow an employee to work beyond normal hours. Gift certificates that are redeemable for general merchandise or have a cash equivalent value are not de minimis benefits and are taxable. A certificate that allows an employee to receive a specific item of personal property that is minimal in value, provided infrequently, and is administratively impractical to account for, may be excludable as a de minimis benefit, depending on facts and circumstances." |
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Re: Prepaid cards tax-exempt?
posted at 2/1/2012 6:42 PM EST
on Workforce Management
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Posts: 148
First: 9/20/2011 Last: 12/12/2012 |
In Response to Prepaid cards tax-exempt?: A question as posed by one of our readers. Any thoughts? HI, I just read your article regarding pre-paid cards as rewards to employees. How is this reward to employees exempt from the IRS De Minimis Fringe Benefit rule? Karen Butler HR Business Partner FYI, here's the story and link: Prepaid Gift Cards Offer the Benefit of Found Money http://www.workforce.com/article/20120125/NEWS02/120129968 Posted by rick_bell As Nork stated, these cards are taxable regardless of the size of the amount. If you notice, the second comment mentions how this detracts from the impact. The "easy" answer is to gross up the amount when you add it to the employees compensation so that they net the amount that is awarded. In effect you give an employee $100 for the $75 prepaid card you promised. |
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Re: Prepaid cards tax-exempt?
posted at 2/2/2012 10:26 AM EST
on Workforce Management
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Posts: 1
First: 2/2/2012 Last: 2/2/2012 |
Aside from taxes, there are fraud and embezzlement concerns. The company should ensure that all cash cards are acquired and distributed in a manner which records everything and is subject to controls and audit. Otherwise, it is an easy way to steal - i.e., a manager can buy cash cards using his expense account and distribute 90% of them but keep the rest. |
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Re: Prepaid cards tax-exempt?
posted at 2/2/2012 10:36 AM EST
on Workforce Management
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Posts: 148
First: 9/29/2011 Last: 12/10/2012 |
Not sure that the IRS is concerned about the fraud aspect, but they certainly would be concerned about cash or cash equivalent compensation being given without the appropriate taxes being withheld. But it's a valid point nonetheless. |
Forums » Topic Forums » Benefits & Compensation » Prepaid cards tax-exempt?
