BUSINESS AND SUPPORT SERVICES
TAXATION OF GIFTS, PRIZES, AND AWARDS TO EMPLOYEES
Navarro College adheres to rules and regulations of the IRS to treat gifts, prizes, and awards to employees as compensation and to tax them accordingly. The college supports the recognition of outstanding employee contributions through the use of gifts, prizes and awards. However, all payments made from college funds, or items of value given to employees, are considered compensation subject to federal, state and employment tax withholding, and will be reported on Form W-2 unless a specific exemption applies. Any question concerning the taxability of a gift, prize or award should be discussed with the Director of Business Services and Cashiers Office and/or Director of Payroll and Accounts Payable prior to processing the transaction.
These procedures provide guidance regarding the tax implications of gifts, prizes and awards made to employees so that: 1) proper communication is given to the employee at the time of receipt; and 2) the college is in compliance with federal and state tax laws and regulations.
The taxation of gifts, prizes and awards is summarized in the three categories below. Departments may not use the Procurement Card to purchase gifts, prizes or awards since reporting to the individual recipient is required. See Procurement Card Policy for more detail.
CASH & CASH EQUIVALENTS
Cash gifts, prizes or awards, including gift certificates and gift cards (cash equivalents), are considered supplemental wages and are always reportable as taxable compensation, regardless of the dollar amount and beginning with the first dollar. Gifts, prizes or awards of cash and cash equivalents must be processed through Payroll Services and are subject to federal, state and employment tax withholding. The gift, prize or award must also be included in the employee’s year-end Form W-2, Wage and Tax Statement.
NON-CASH VALUED AT $100.00 OR LESS
A gift, prize or award may be considered a De Minimis fringe benefit and not taxable compensation to the employee if: 1) it is a non-cash gift of property such as food, flowers, clothing, etc.; 2) it is valued at $100 or less; and 3) it is given only on an occasional basis.
NON-CASHVALUED AT $100.00 OR MORE
A non-cash gift, prize or award valued at more than $100 is taxable beginning with the first dollar and must be processed through Payroll Services. Such gifts, prizes and awards are reportable as taxable compensation to the employee, subject to appropriate federal, state and employment tax withholding, and must be included in the employee’s year-end Form W-2, Wage and Tax Statement.
EMPLOYEE ACHIEVEMENT AWARDS
Exceptions are made to the General Rule regarding Employee Achievement Awards. Special rules apply to non-cash awards based on an employee’s safety achievement or length of service with the college. A safety or length of service award may be excluded from the employee’s income, if specific criteria are met pertaining to the form and timing of the award, its dollar value, and its method of presentation. Departments or schools considering such awards should consult the Director of Business Services and Cashiers Office and/or the Director of Payroll and Accounts Payable prior to making such awards.
Award – A cash or non-cash item given to show thanks, support, goodwill, or recognition of an outstanding accomplishment. Examples include achievement in teaching, research, retirement, or other job performance related activity. A stipend could be one type of an award.
De Minimis A non-cash gift or award that is so small that accounting for it would be unreasonable or administratively impractical. De Minimis gifts, prizes or awards may only be provided on an occasional basis and must be small in amount. Only non-cash gifts of property valued up to $100 are considered De Minimis. Cash awards, gift cards and gift certificates are never considered De Minimis.
Gift – A cash or non-cash item given as a gesture of goodwill or appreciation, or in recognition of, or in connection with a holiday season, or some other purpose not specifically related to regular job performance. Examples may include holiday or birthday gifts.
Non-cash Item – A gift of property such as a plaque, tickets for a sporting or cultural event, electronic equipment, T-shirts, flowers, etc. Gift certificates are treated the same way as cash for tax purposes.
Prize – A cash or non-cash item given at random or as a result of chance, not directly related to job performance. Examples include random door prizes and grand prizes at college sponsored events.
Approved: November 1, 2016
Date Issued: November 1, 2016
Updated: August 13, 2019