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service awards

wire manufacturerwire manufacturer 16 Posts
in Compensation Vote Up0Vote Down
[font size="1" color="#FF0000"]LAST EDITED ON 03-27-02 AT 02:04PM (CST)[/font][p]We are thinking of giving out an award to each employee who has been with our company for at least 5 years. (We are only 7 years old so we will give to anyone who has been here 5, 6 or 7 years and then give each year after that) In researching I see where I can't give cash without it being taxable. Is there a limit as to what the award can cost without it being taxable to the employee? The award will be a material item such as a jacket or something similar.
Any advice would be appreciated.
Thanks for your help.
Susan
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Comments

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  • Carol CACarol CA 173 Posts
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    I think as long as you are giving them a material award such as the jacket for years of service, you are OK. You can't give cash bonuses, however. What we do is allow the employee to select a gift from a brochure. The brochures increase in value as you progress in years of service. We give awards in 5 year increments.
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  • jbnunziojbnunzio 26 Posts
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    I pulled right the the BNA Payroll management Guide that applies to incentive payments which is on page 115:2403, under other awards, prizes, gifts. It states, "In general, awards and prizes received by employees that more than a de minimis value must be treated as taxable income to the recipient. Where an employer is the person making the award, income tax withholding, as well as FICA and FUTA taxes, normally apply. However, the federal tax code provides an exception for length of service and safety awards-known collectively as employee achievement awards." The award in order to qualify for this special tax treatment must consist of tangible property that is awarded in recognition of a workers legnth of service. Other conditions are as follow:
    -The award must be given in a "meaningful presentation". The presentation need not be elaborate, but should consist of some type of ceremonial observance according to the IRS.
    -The award must not be disguised as compensation. That would include those granted at the same time as a salary increase or as a substitute for a prior cash bonus program.

    Therefore, if you follow the above listed guidelines, you should be fine with awarding a jacket or some other token for service.




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