Do I have to pay tax on employee achievement awards?
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You can exclude from
taxable income on your tax return employee achievement awards you receive only if your
employer can deduct the employee achievement awards on it's tax return. To be tax deductible by your
employer on it's tax return, and excluded
from your tax return, the employee achievement awards
must meet ALL the following IRS requirements:
 | Be given for length of service after a minimum of five years of service, or for safety
achievement. Only one length of service award can be given every five years.; |
| Be tangible personal property, other than cash, gift certificates or equivalent items; |
| Be given under conditions and circumstances that do not create a significant likelihood
of the payment being disguised compensation; |
| Be given as part of a meaningful presentation; |
| Be no more than the specified dollar limits. |
There are two types of employee achievement
award plans,
tax qualified and non tax qualified. A tax qualified employee achievement
award plan is an
established written plan that does not discriminate or favor highly compensated employees.
A tax qualified employee achievement award plan can deduct up to $1,600 for all employee achievement awards to the same employee
on it's tax return during a
taxable year. The average cost of all employee achievement awards during the
tax year for all employees cannot
exceed $400.
For a non tax qualified employee achievement
award plans the
tax deduction limit on the employer's tax return is $400 for each employee.
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Related tax
information about employee achievement awards |
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Bonuses and Awards
Income Related Questions and Answers |
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IRS publications about employee achievement awards:
For more tax information about employee achievement awards refer to IRS
Publication 525, Taxable and
Nontaxable Income. Also see IRS Publication
17, Your Federal Income Tax. |
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