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Taxable Award/Gifts California

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  • Taxable Award/Gifts California

    I just want to get some other opinions on the interpretation of "movie tickets" as being considered a 'taxable award/gift' for an employee. Our company does dole out gift cards to restaurants and malls for $25 as well as $5 Starbucks cards. I add all of these to the employee's taxable wages which then self adjust on their next paycheck. My director seems to think that 'movie tickets' like to AMC or Pacific Theatres do NOT count as a taxable item, but I don't agree. We have gone 'round and 'round about this.

    For those of you who do report taxable awards/gifts: do you include movie passes or not?

  • #2
    If the dollar value of a non-cash gift is relatively low and it is given infrequently, it may qualify as a "de minimus benefit” and treated as non-taxable wages to the employee. De minimus benefits include such things as occasional tickets to entertainment events, holiday gifts, flowers, fruit, books, etc. Note, however, the IRS takes the position that 'gift cards" redeemable for a a broad range of products (i.e., $50 WalMart gift certificate) are not a de minimis benefit.

    For more information, read this IRS article http://www.irs.gov/govt/fslg/article...5764,00.html#1
    Barry S. Phillips, CPA
    www.BarryPhillips.com

    IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

    Comment


    • #3
      "cash and cash equivalent fringe benefits, (for example use of a gift card,charge card, or credit card), no matter how little, are never excludable as a de minimis benefit except for occassional meal money or transportation fare." from IRS Publication 15B. So I would agree that the gift cards are taxable.

      It does go on in the same publication to say that "occasional tickets for entertainment or sporting events" can be considered de minimus. So this goes with your director's viewpoint that they would not be taxable.

      Comment


      • #4
        I have read thru and do understand 'de minimus fringe'. It is defined (IRC 132(d)(1)) as any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to its employees) so small as to make accounting for it unreasonable or administratively impracticable.

        Why might a gift card to an AMC movie theatre for $20 or a giftcard to Starbucks for $5 be taxable when handing the employee 2 passes to a movie is not?

        I'm not trying to be a turd here, I'm just not convinced yet.

        Comment


        • #5
          fensh: I have read thru and do understand 'de minimus fringe' rules

          Not to sound overly harsh, but if you understood the "de minimus fringe" rules, you wouldn't be asking the question.

          fensh: Why might a gift card to an AMC movie theatre for $20 or a giftcard to Starbucks for $5 be taxable when handing the employee 2 passes to a movie is not?

          Who said any of these items are taxable?

          "Gift cards" that are redeemable for a broad range of products are treated as cash equivalents and not qualify as de minimis fringe benefits. A $5 "gift certificate" to Starbucks probably doesn't enable the employee to purchase the broad range of products envisioned by the IRS that would transform the gift card into a cash equivalent item. Same thing for $20 AMC gift card.
          Barry S. Phillips, CPA
          www.BarryPhillips.com

          IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

          Comment


          • #6
            Not to sound overly harsh Mr. CPA, but I don't think you quite get this gray area I am in with my Director. She insists $5 Starbucks gift cards are reportable taxable income and does direct me to note them on ee wages.

            I guess it all comes down to however each of us interpretes the IRS language. I still don't have my answer.

            By the way, I am a CPP. I studied hard and passed the national exam and trust me, I do understand what I am doing.

            This Labor Law board confuses me though, sometimes. I come here to get opinions from other payroll professionals, and end up getting smug, smart answers like I am 2 years old. Other people who post here get way worse treatment then that from some of you here (and you know who you are).

            Who owns/runs/moderates this board?

            Comment


            • #7
              I moderate it; I neither own nor run it.

              I try to keep everyone as polite as possible; however, there are not enough hours in the day to read each response for every possible interpretation of it; nor can I control what the reader finds in it that may not have been intended by the responder.
              The above answer, whatever it is, assumes that no legally binding and enforceable contract or CBA says otherwise. If it does, then the terms of the contract or CBA apply.

              Comment


              • #8
                Thank you for your reply cbg.

                Comment


                • #9
                  fensh: I am a CPP. I studied hard and passed the national exam.

                  I don't know what a CPP is, but I'll take you at your word that you studied hard and passed whatever exam you took.

                  fensh: I still don't have my answer.

                  I have explained the law as clearly as I can. I even linked you to an IRS article that discussed the issue in great depth. Not much more I can do for you.
                  Barry S. Phillips, CPA
                  www.BarryPhillips.com

                  IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

                  Comment


                  • #10
                    I would argue that tickets to the movies or a sporting event are meant to be for a specific event....for example, tickets to the rodeo on a specific night that can not be exchanged for any other time. Almost a "use it or lose it" idea.

                    I would argue that a gift card for the movies is taxable because it is a gift card, regardless of where it is good for. Because it could be used for any movie, any time or for other merchandise such as food etc. And would have more of a "cash value". And it is not "use it or lose it".

                    I would argue that a $5 gift card to Starbucks is taxable. Because Starbucks sells a wide range of items, not just coffee. It could be used for mugs, music, coffee, pastries, etc.

                    Honestly, while I know you think you are correct, is this a hill you want to die on with your director? At some point, your director is going to get very tired of you arguing a point that we all admit can be grey. If your company's CPA/tax accountant has signed off on how it is currently being done, then let it rest.

                    I assume CPP stands for Certified Payroll Professional. Honestly I do payroll and have for years in a company where we have all sorts of weird tax issues. And by no means would I say I knew more than a tax accountant just because I had passed a certification and/or had x years experience processing payroll.

                    But just because I would disagree with Barry doesn't mean I would not do it his way since he is a CPA and I am not! *Ü* I would document my position but other than that I would trust what my CPA/tax accountant was telling me and I would make sure that CPA had Professional Liability Insurance.
                    Last edited by hr for me; 02-21-2008, 06:14 AM.

                    Comment


                    • #11
                      I have represented numerous clients before the IRS on a variety of wage reporting matters. I can tell you that none of the IRS auditors I have dealt with ever blinked at the occassional $5 Starbucks card, $10 Krispy Kream donut card, or $20 AMC-type gift certificate, etc. It is simply not the type of things they are going after.

                      Simply put, the IRS has alot better things to do than argue whether the occassional $5 Starbucks card entitles the employee to purchase a limited number of items (in which case the card would be non-taxable wages) or a significant number of items (in which case the card would be tantamount to a cash equivalent and taxable). As I mentioned above, however, a gift certificate to WalMart (or Sears, JC Penny's, etc) is quite another story.

                      Bottom Line: I agree with "HR For ME" - If your company's CPA/tax accountant has signed off on how it is to be done, then let it rest.
                      Barry S. Phillips, CPA
                      www.BarryPhillips.com

                      IRS Circular 230 Disclosure: This response is intended to provide general information and written for educational purposes only. It does not establish a client relationship. This communication is not intended to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to any party any matters addressed herein.

                      Comment

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