IRS Investigating American Express Sales Pitches

The Internal Revenue Service is investigating American Express over a questionable tax break that it pitched to clients, WSJ reported Friday, citing people familiar with the matter. From the report: The civil investigation has been under way for a few months, these people said. The Wall Street Journal reported in November that AmEx salespeople touted a tax break based on a shaky interpretation of tax law. The pitch was part of a strategy to persuade business owners to sign up for costly payment services. AmEx previously acknowledged, in response to the November story, that some members of its U.S. sales organization "failed to uphold our values and had positioned certain products inappropriately, specifically with respect to tax benefits." An AmEx spokesman said this week that "we have already taken a number of actions to change products, policies and personnel and are continuing to cooperate with our regulators and government agencies. "As we said in November, we engaged an external law firm to conduct an investigation of our small business sales practices in the U.S.," he added. AmEx "will take further steps as appropriate." AmEx previously said that it discontinued wire services associated with the pitch. These had been available to a wide range of companies, according to people familiar with the matter.

I received this pitch

[Midnight_Falcon]

and thought it was SHADY. After signing up for an Amex business credit card with Amazon benefits, we got a call from an Amex Rep talking about moving us to a charge card. He was pretty dismissive, and explained "We don't sell credit cards, just charge cards" and talked about this payment system where we could run our payroll through Amex, and then get some type of kickback/benefit for it.

. We thought this was elaborate, error prone and also the tax benefit seemed very novel and shady, so we kept our Amex business card.

. Now, unsurprisingly, it looks like that blew up..the problem is, they've been doing this for years (the call I had was in August 2020), and the people behind it have probably already collected their bonuses.

Re:

[140Mandak262Jamuna]

So ok, similar to frequent flyer miles earned by employees for personal use. Employer pays airfare and shows it as an expense in tax forms. Employee gets the miles, but does not show it as income or benefit-in-kind in his/her tax returns. Very common, but IRS has not objected to it, so far.

But one can imagine running the entire company payroll through a card and earn cash back and miles and benefits on personal account. At that scale even IRS would object. Personal use of employer paid stuff is a gray are

Re:

[Midnight_Falcon]

Sort of, but the pitch was to have the business wire the money over to Amex and then that be transferred on to pay payroll expenses. There was some percent attached fee around 2-3%, of which you'd collect points; so by spending a bunch of money on these Amex fees you could write those expenses off and then get tax-free kickback points for personal use. Essentially robbing the business to get a little advantage on taxes, but also to pay amex fees.