The University recognizes that departments may want to use gift cards for awards, incentives, research programs, and other business-related functions. As such, procedures must be followed to ensure that gift cards are cared for properly and substantiated in a timely manner.
According to the IRS , a gift card, gift certificate, store-value card or a prepaid credit card, collectively referred to as a gift card, is considered a cash or cash equivalent that is subject to taxes regardless of the face value. The value of gift cards given to students and non-employees is taxable and reportable income on IRS form 1099-MISC if the value of gift cards received aggregates to an amount of $600 or more in a calendar year. Gift cards should not be provided to employees without first checking with Human Resources. Gift cards provided to employees must always be reported as taxable income and included on the employee’s W-2.
How to Purchase and Substantiate a Gift Card
Gift cards should be purchased on a University PCard unless the employee or student has received an advance for a research project. While gift cards are in the department’s possession, they must be properly secured in a locked area/cabinet. Any theft or loss of cards will need to be paid back by the cardholder. Gift cards should only be purchased in the exact amount needed, purchasing excess gift cards that can not be substantiated within policy is considered a PCard violation.
Gift cards purchased on a PCard are required to be substantiated in accordance with PCard policy, which states that all transactions must be substantiated within 28 days of posting in Concur. The following documentation is required to substantiate a gift card purchase:
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Itemized receipt showing the vendor they were purchased from, the number of cards purchased, and the amount on each card.
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For each gift card purchased, the cardholder must have a name, email, amount given, and a signature of recipient of the card acknowledging receipt.
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If a gift card (or accumulation of gift cards) for any participant is greater than $100, a W-9 must be collected from the recipient.
Example Scenarios
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The admissions department has an incentive program to attract new students to apply for admission. Each student that signs up will have one chance at winning a $50 gift card to the college bookstore. Betty Bobcat wins the final drawing and receives a $50 gift card
- The admissions department would need to provide documentation with Betty Bobcat’s name, email, amount given ($50), and a signature acknowledging receipt of the gift card.
- The admissions department would also need to provide the itemized receipt from purchasing the gift card.
- Lastly, the admissions department would need to provide documentation that shows the business purpose of their drawing.
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Jane Smith is performing a research project which has three phases. Participants will receive one gift card at each stage of the project. After completing stage one, the participant will receive a $25 Amazon gift card. After completing stage two, participant receives a $25 Amazon Gift card. After completing stage three, participant receives a $75 Amazon Gift card.
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Jane would need to provide documentation with the participant’s name, email, amount given at each stage, and a signature acknowledging each distribution of gift cards
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Jane will also need to provide an IRS W-9 form because the TOTAL of all three combined is over $100.
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Lastly, Jane would need to provide the itemized receipt from purchasing the gift card.
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Gift Cards to Foreign Nationals
Prior to giving out gift cards of any value to foreign nationals, the department needs to contact (a) the Tax Department, tax@ohio.edu , with the expected gift card amount, to determine their tax status and tax consequences, and (b) the Office of International Student and Scholar Services, isss@ohio.edu , to ensure that they are in compliance with their immigration requirements as well, if applicable.
When gift cards are given out instead of cash payments the University is still required to comply with tax withholding and reporting requirements. Therefore, the department will be responsible for paying the withholding taxes.