MONETARY AWARDS

Generally, treatment of monetary prizes and awards depends upon the employment status of the recipient and the source of the funds being awarded. Most considerations have to do with following University disbursement procedures, and income tax ramifications.

• Employee Recipient

Most teaching awards, employee achievement awards, or monetary prizes are taxable to the recipient employee and therefore must be reported to the IRS. It does not matter if the funds originate in the University Foundation or in the University itself. However, the payment itself must be included in the employee's pay check, to provide for adequate withholding.

Normal University or Foundation payment authorizations must be obtained, though the approved purchase request should be accompanied by a formal letter of explanation and forwarded to the Director of Accounting (rather than the Purchasing Office), who will expedite the inclusion of these awards in the employee's pay.

• Non-Employee Recipient

If the recipient of a monetary prize or award is not an employee, normal purchase request procedures are to be followed to make the disbursement. If the award amount equals $600 or more, the Accounting Office will report the amount to the individual and the IRS at year-end on a 1099-MISC form.

• Special Funds Raised for Gift

Funds raised from individual contributions for a specific recipient (and not paid to the University as a tax deductible donation) present no tax ramifications. If the funds have been temporarily placed in a fiduciary account with the Contracts & Grants Office, normal approval procedures are to be followed in order for the funds to be released. This situation might occur when funding a retirement gift or party, for example.

It is recommended that, for security purposes, gift checks or monetary award checks for non-employees be mailed from the Accounting Office directly to the recipient. Awarding departments could substitute a ceremonial check or award letter at the ceremony.

NON-MONETARY AWARDS

Normal University purchase request procedures must be followed to purchase tangible personal property to be given as an employee achievement award or prize.

An employee achievement award is an item of tangible personal property awarded to an employee because of achievement or safety achievement. They are excludable from the employee's income if the fair market value of the award is $400 or less. The award must be given as part of a meaningful presentation under conditions and circumstances that don't create a likelihood that the payment is disguised compensation.

"Tangible personal property" doesn't include cash or any gift certificate other than a nonnegotiable gift certificate conferring only the right to receive tangible personal property. A department store or restaurant gift certificate, for example, is acceptable.

Safety achievement awards do not qualify if given to managerial, administrative, professional, or clerical employees, or if such awards previously have been given to more than 10% of other employees during the year.

NEED HELP INTERPRETING THIS POLICY?

The previous guidelines for the awarding of prizes can seem complicated because of income tax issues. If you feel you need assistance in interpreting these guidelines, please contact the Accounting Office Director at 334-7684.