By Steven D. Mercatante Esq.

 
Gift cards can represent a significant reporting and compliance risk. Read on to find out more about gift cards and handling the risk they may represent to your organization.
 
If you filed electronically, and requested your extensions, then your filing season probably closed out early this summer. With warm weather at hand, it probably seems odd to consider what your organization did last winter, but you had better, because the IRS is. It is common for many organizations to provide their employees with some form of appreciation for the work they have done throughout the year. In many cases, this may have come in the form of a gift card or gift coupon. The question you should have asked as you frantically prepared payee statements and tax filings was: are gift cards or gift coupons excludable from gross income as a fringe benefit? Regrettably, many of you may have forgotten to address this issue.
 

With Proposed Penalty Notice season coming as sure as the dog days of summer there is no better time to review your organization’s procedures for issuing gift cards to employees. This article will help you stay in compliance with IRS goals for handling payments made to employees by gift card. First, we will look at the basics of the issue. Second, this article will provide a brief overview of fringe benefit requirements. Finally, we will conclude with some advice that can help make your job a lot easier moving ahead.