AmEx Gift Checks

Almost a year ago, I received a $25 American Express Gift Check (which they stubbornly spell with the British/Canadian/Australian “cheque” despite being named American Express… but I digress.). A few of these were given out to employees on our team as recognition for good work. (In fact, it was really recognition for completing a high-profile project, which had much more to do with the assignment of tasks than with their execution… but again, I digress. [sorry]) From the web site, I gleaned that these checks were meant to be gift certificates that can be used anywhere. Safer than cash, but less likely to be deposited than a straight check (or even a cheque).

These gift checks are strange and inconvenient. I figured the company must think that the attractive gold envelope makes the gift seem more special, which is why they would pay the $2.50 fee to give me $25. Or perhaps it’s the idea that it’s a generic gift certificate; some people would rather be given a gift certificate that they have to spend than a check they feel they should deposit.

However, I later learned that when they want to give more than $25, the company gives multiple $25 gift checks. Hmm. That got me thinking. After a bit of investigation, I think I understand why they give out these gift checks:

First, companies cannot give gifts to their employees. Not in the IRS sense of the word “gift”. Companies give wages to their employees. When your company gives you something extra, it’s a bonus, not a gift, and the IRS wants their share. Now, the IRS (wisely) does not rely on you to report these “gifts” as income (although you are required to do so). The employer is also responsible for reporting the income on your W-2. Even if it’s not cash (say, a gold watch or a car [ha!]), the employer must report this as part of your income.

Now, there are some exceptions. One of the exceptions is called the “de minimis” rule. “De minimis” is Latin for “you’ve got to be kidding.” If your employer gives you a 20-year service award plaque valued at 35 cents, nobody has to account for it. Company picnics, gift baskets, and t-shirts with that spiffy company logo all tend to fall under this rule.

But what about gift certificates? The IRS attempted to nip this in the bud by saying:

if your employer gives you cash, a gift certificate, or a similar item that you can easily exchange for cash, you include the value of that gift as extra salary or wages regardless of the amount involved

Hmm. I don’t remember seeing that $25 gift check included on my W-2. What’s going on here? Well, I found a page for HR professionals that clarifies:

a federal district court has held that $15 or $25 “Holiday Gift Certificates,” which were redeemable in merchandise at stores selling the employer’s products, were not wages

Now, wait a minute. The IRS says they’re taxable. That’s final, right? When I’ve got a question about whether something is taxable, I look up the appropriate IRS publication and follow what it says, don’t you?

Next time you peruse IRS publication 17 (you have read it, haven’t you?), take a look at the text at the bottom of the second page:

This publication covers some subjects on which a court may have made a decision more favorable to taxpayers than the interpretation by the IRS. Until these differing interpretations are resolved by higher court decisions or in some other way, this publication will continue to present the interpretations by the IRS.

Did you get that? IRS publications are not law. Read that last sentence again; I’ll wait. The IRS publications are their interpretation of the law. That’s scary. A federal court decided that the IRS was wrong to claim that all gift certificates should be treated as wages. The IRS doesn’t seem to have jumped to update their publication. But companies who hire HR consultants with smart lawyers know about these types of rulings.

This may be a bit of stretch, but I’m guessing that companies are relying on that federal court ruling to allow them to give $25 gift certificates to employees without reporting it as wages. But what type of gift certificate would please everyone? American Express jumps in with their gift checks that are “good virtually anywhere.” I’d be willing to bet a $25 American Express gift check that their most popular denomination is $25 and their biggest market is companies looking to give out employee gifts.

I presume that HR has blessed these AmEx gift checks and supervisors throughout the company have a supply to give out. Sometimes they give out more than one at a time to create a larger gift. HR probably doesn’t know that (or doesn’t want to know). But when it happens to me, do I have to report it as income? Does anyone have the phone number for that federal court judge? I have a question for him.

Posted by Jeremy on September 13, 2004. 2 Comments.

Why I Like Ecclesiastes

I remember a day growing up when my brother and I discovered that you could call a certain number on the phone and play a game. I think it was sort of a choose-your-own-adventure game where you pressed a number to make your choice. We thought it was great and we were enjoying playing it. Then, Mom announced that she had made fudge and brought in the tray. What more could a child want! But I distinctly remember that, as I ate the fudge and listened to my brother play the game, I felt empty and dissatisfied. Here I was, with every pleasure I could desire, yet it didn’t really satisfy. Tomorrow would be another day and life’s ups and downs would continue.

Much later in life, I worked in Massachusetts for six months and stayed with a Christian family there. They spent nearly every weekend working on their house (which had been a fixer-upper, but was coming along nicely), and every weekend I helped them. This was a great experience and I have no complaints, but I do remember one day, while painting a wall, feeling dissatisfied with all this work. Often when you work on a project, you feel satisfied with what you accomplish. Perhaps because this work continued every weekend, I felt like there was no point in it all. For all the work I did, there was always more to do. What satisfaction could there be in life when one endlessly works? (In fairness to the family with whom I stayed, I should note that they went out to see fireworks that very night. They knew how to enjoy life; it was I who had the problem.)

Every once in a while, I would have one of these glimpses into the futility of life. It would bother me for a while, I would struggle with it, and then I would go on with life. If pleasures can’t satisfy, then what do we have to look forward to? If our work is pointless, then why even live? This was too stark to accept, so I never did.

These are the questions that we try to avoid and Ecclesiastes tackles head-on. Solomon (the author) first establishes the truth of the futility of life. If you haven’t figured out that your life (under the sun) is meaningless, then reading Ecclesiastes will make you depressed. But, if you’ve been confronted with that terrible truth, and you’re wondering what to do about it, Ecclesiastes is a wonderful book. Finally, someone admits that life is futile! These pleasures have no lasting satisfaction. The work of life will never be done. It’s true. You’ve got to admit it, or you’ll always be pursuing and failing.

But where do we go from there? Ecclesiastes 5:18-20 is a good summary:

Then I realized that it is good and proper for a man to eat and drink, and to find satisfaction in his toilsome labor under the sun during the few days of life God has given him-for this is his lot. Moreover, when God gives any man wealth and possessions, and enables him to enjoy them, to accept his lot and be happy in his work-this is a gift of God. He seldom reflects on the days of his life, because God keeps him occupied with gladness of heart.

Or, put another way, Ecclesiastes 4:5-6 says:

The fool folds his hands
and ruins himself.
Better one handful with tranquillity
than two handfuls with toil
and chasing after the wind.

Don’t work too hard, because it won’t really satisfy. Don’t pursue pleasures, because they won’t satisfy. Do the work God has given you, and enjoy the pleasures He gives you. Thank God for it.

Now I like Ecclesiastes. It reassures me that I’m not missing out on something great. My lot is to work at the job God has given me, to love my wife and raise my children, and to enjoy the good health and happiness that God has granted me, for as long as He wills.

Posted by Jeremy on September 9, 2004. 4 Comments.