Purchase and Distribution of Gift Cards
What University policies govern the purchase and distribution of gift and bank cards?
Can gift cards be purchased using a ProCard?
No, gift cards should be purchased through the Controller’s Office Swift Prepaid Gift Card process. Gift card purchases are a restricted purchase of the ProCard.
How do I handle gift cards distributed to employees?
- Employees as Research Study Participants:
Employees who participate in research studies are treated the same as non-employees and are subject to all of the reporting requirements to which non-employees are subject. (i.e. these amounts could be reported on a 1099-misc form)
- Employees receiving gifts or awards:
Employees who receive gift cards as an award or gift will have the amount of the gift card added to their form W-2 for all amounts.
Do I need to collect W-9s for all recipients of gift cards?
No. All payee personal information is entered directly into the Swift Prepaid Solutions system. (If you have any existing single merchant cards (Target, Wal-Mart, Kroger, etc.) or PNC Visa cards, you would still need to collect W-9 forms or complete Non-Cash Compensation forms until you transition to the Swift system.)
When will a recipient receive a form 1099?
Non-employee gift card recipients receive a form 1099-misc. from the University when all non-employee payments from the University are equal to or greater than $600 for the calendar year. This includes employees who receive non-employee compensation for their participation in research studies that is equal to greater than $600 in a calendar year.
Why do I need to collect tax information from non-employee recipients that are receiving less than $600 in gift cards?
- Obtaining a payee name and tax ID number (i.e. social security number) provides a measure of assurance that an individual is authorized to receive compensation.
- Complete payee data provides a record of account to assist in the internal auditing of gift card distributions.
- Complete payee information provides data that may be relied upon by the IRS during an examination to confirm that the University appropriately prepared forms 1099 when applicable.
- Complete payee information provides an official name of record (SSN) for the recipient in order for the Controller’s Office to determine if multiple departments are distributing gift cards to the same individual, and if, in total, this individual received compensation that exceeds the $600 threshold causing the distributions to be reportable to the IRS.
I have already handed out existing single merchant and/or PNC Visa gift cards and failed to request a form W-9. Do I need to find these individuals and have them fill out and return a form W-9?
The Controller’s Office will be monitoring the distribution of gift cards on a quarterly basis and may request, at their discretion, additional follow-up to locate gift bank card recipients to acquire forms W-9.
Will I be notified by the Controller’s Office for failing to submit forms W-9 to the Controller’s Office?
The Controller’s Office is tracking and monitoring the purchase of gift cards and will notify all departments that do not voluntarily forward original W-9 forms to the tax department.
Why now? In the past no one has requested any information regarding gift cards?
The Rules and Regulations of the IRS that govern the distribution of gift and bank cards have been in place for some time, but the focus of the IRS on colleges and universities, as well as the compensation of non-employees, has significantly increased.
How much compensation is distributed by the University in gift and bank cards?
Our efforts to obtain statistics regarding the distribution of gift is just beginning, but in reviewing prior calendar year figures, the University distributed in excess of 6,000 cards and $200,000 in total spending with an average value of $30.
What Internal Revenue Code and Regulations govern the distribution of gift cards?
Only specifically excluded items can be excluded from gross income. Internal Revenue Code Section 132 (a) lists the fringe benefits that can be excluded.
The IRS has given additional guidance with Treasury Regulation,§1.132-6 (c), specifically addressing gift cards as a form of compensation not excludable under section 132 of the Internal Revenue Code.
The IRS has further reinforced this position with Technical Advice Memorandum 200437030.