Employee Awards and tax rules
dchr9203
431 Posts
[font size="1" color="#FF0000"]LAST EDITED ON 10-15-04 AT 08:33AM (CST)[/font][br][br]Just taking a poll here. We give "spot" award bonuses to our employees, which is in recognition of outstanding performance, etc. Taxable, of course. As if being formally recognized with a cash bonus isn't enough, we have a group that is pushing for some "momento" as part of this recognition (since once the cash is gone there's nothing to remember it by, wah wah), and are not interested in certificates. So, we're talking nominal value, $10 or less, and I'm wondering if you guys have insight into the "tax rules" or consequences for giving both a taxable cash bonus and a nominal value momento (non-taxable) as part of the same recognition.
Thanks
Thanks
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We use things like Logo polo shirts/coffee mugs...semi-practical company related things that help get our name out there, but that ee's would be unlikely to actually spend money on.
Section 274(j) of the Internal Revenue Code, enacted by the Tax Reform Act of 1986, provides, in general, that an employer may deduct the cost of employee achievement awards given to the same employee up to $400.00 in any year. If the incentive awards are employee achievement awards made under one or established written plans or programs of the employer, the $400 deduction limitation is increased to $1,600.00 per employee.
Under Code section 74(c), however, the same awards are not included in the income of the employee. In addition to being excluded from the employee's taxable income, the employee achievement awards are also excludable for employment tax purposes as well as from the social security benefit base. The employer must report on the employee's form W-2 as wages or compensation any portion of the employee achievement awards that is included in the employee's income. This amount is also treated accordingly for all other tax purposes (including social security tax).
In order to qualify for this favorable tax treatment, an incentive award must be an "employee achievement award," that is, it must be an item of "tangible personal property" transferred by an employer to an employee for safety achievement or length of service. Moreover, the award must be given as part of a meaningful presentation and cannot be the payment of disguised compensation to the employee. Thus, for example, an incentive award will not qualify for favorable tax treatment if it is given at the same time that annual salary adjustments are made, or if it's used as a substitute for a program of awarding cash bonuses. Code section 274(j)(3)(A).
#1 thing a consultant shouldn't say: "I could tell you the answer right now, but we're committed to a three month project..." #-o
We give out gift certificates basically for things like employees submitting adopted cost reduction ideas. Most of the certs are $25 with a few year end big winners of $100 and $150. Each of our 200 locations is required to send a list to corporate accounting at year's end detailing each of the names and amounts for inclusion on the W-2.
I'm no accountant, just the list maker. Oh, and I have the key to the shirt cabinet.
#1 thing a consultant shouldn't say: "I could tell you the answer right now, but we're committed to a three month project..." #-o
It cannot be converted to cash, must be redeemed for product. Still taxable?
#1 thing a consultant shouldn't say: "I could tell you the answer right now, but we're committed to a three month project..." #-o