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Debit Card Bonus not taxable?

I understand your reasoning but the employee would submit his receipt in the reimbursement plan. One of my administrative duties is reimbursements and it took a lot of back-and-forth to get one person seeking reimbursement to submit bills or receipts or invoices and never the credit card statement.

The credit card statement has way too much personal information on it that's none of the employer's business. The only way for the employer to count this as income is to require the employee to submit the credit card statement for review to see if rebates were applied, a further complication being that the rebate would show up on a subsequent credit card statement.

That would be an outrageous violation of privacy and a massive administrative burden to the employer.

The employer is not supposed to know or care if the reimburseable employee business expense was paid by cash, check, credit, or debit card.

There's simply no way for the employer to provide the employee the check stub or information return treating the rebate as earned income, which I assume you're thinking would be subject to Social Security taxes.

I've gotten rebates in the form of checks or gift cards, which are temporary debit cards. None of that would even appear on the credit card statement.

I disagree with you. This is not earned income from the employer to the employee.

Reply to
Adam H. Kerman
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Right, it's not earned income. But technically it should be taxable, and as wages.

The entire cost of a plane ticket is deducted by the employer and paid to the employee. But it's not zero sum for the employee - he gets miles or another form of rebate on top of that. It's money that was never taxed, and is not exempt from tax in any way.

Reply to
Stuart O. Bronstein

Perhaps the O.P. didn't suggest it was earned income.

I disagree with him that the onus is on the employer to report it.

How can income that's not earned income be wages? Wages are always earned income.

The only one who has an onus to report it is the employee receiving the bonus on an already reimbursed expense.

But reported as wages given that it's not earned income? I don't see that.

Reply to
Adam H. Kerman

My understanding is that any accession to wealth that comes from an employer to an employee, unless treated otherwise under the Code, is treated as wages and subject to withholding taxes.

I have been known to be wrong about things in the past, so I may be wrong on this. If I am, I'd love to know the basis for it.

Reply to
Stuart O. Bronstein

One exception I can think of is non-cash service awards (like a 15-year award of a gold watch) under a certain dollar amount ($400? $600? something like that) aren't taxable. And if you get a per diem but spend less than the per diem, I don't think that's taxable. But that would all be in the Code.

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Reply to
Rick

example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. ... Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it."

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(Pub 15(b))

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(26 USC §132)
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(26 CFR §1.61-21)

The gold watch and per diem allowances are statutory exceptions.

Here's Thomson Reuter's take (Jan 6, 2022):

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"Generally, all fringe benefits that an employer provides to an employee are included in the employee?s income unless the Code provides a specific exclusion. ...

"[Some credit cards] bypass points altogether in favor of simple cash rebates. These features generally do not result in income when a personal card is used for personal spending. (In that situation, the points or rebates are treated as a discount on the purchase.) But it is less clear that cash or cash-equivalent rewards can be ignored when the purchaser is, directly or indirectly, an employer and the reward recipient is the employee. Cash and cash-equivalent rewards would seem to resolve some of the valuation issues underlying the frequent flyer policy [IRS Announcement 2002-18], and such rewards clearly run afoul of the conditions for excluding a benefit as de minimis, regardless of their amount. Consequently, employers should not assume that the frequent flyer guidance will also control whether employees must be taxed on the personal use of credit card points or rebates that were earned with business purchases ..."

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(Announcement 2002-18)

Reply to
msf

I'm sticking with earned income/wages/compensation for services rendered as synonymous. I just don't understand your position that there can be wages that are not earned income.

I found "accession to wealth". That's not a bookkeeping concept but court decisions. It's used in Commissioner v. Glenshaw Glass Co., 348 U.S.

426 (1955).

There are general definitions all over discussion of the tax code that "compensation for personal services" includes but is not limited to fees, commissions, fringe benefits, and similar items. Of course this includes wages, salaries, commissions, bonuses, and fringe benefits.

With respect to payroll taxes, there is no practical distinction between legal definitions of income subject to witholding versus FICA/HI, although exclusions in law are different. Same comment about RRTA/RRUT, FUTA, EIC, etc.

Getting back to income tax implications of credit card/debit card cash back for purchases, I suppose this should be thought of as a nonaccountable employer reimbursement plan.

Reg. Sec. 1.62-2(c) requires employees who receive advances to return amounts in excess of their substantiated expense. If the employee fails to do so, then th eretained excess is treated as paid under a nonaccountable plan. The trouble is that cash back is after the fact of incurring the expense and therefore not an advance.

Reply to
Adam H. Kerman

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