GAP 200.400, Employee Monetary Awards (Gift Certificates, Gift Cards, Coupons, etc)

I.   General

II.  Payroll Taxes and Fringe Benefits

III. Payment Processing

IV. Other Considerations

V.  Resources

 

I. General

Monetary awards such as gift certificates, gift cards, gifts coupons, vouchers, and saving bonds are considered “cash equivalents” by the Internal Revenue Service when given to an employee of Duke University or the Duke University Health System. A “cash equivalent” allows the purchase of or redemption for a product or service as if cash were being used. As a result, monetary awards are considered compensation to the employee and must be reported as such through the payroll system and are subject to all applicable payroll taxes.

Monetary awards are discouraged due to transaction processing costs and additional financial implications for both the department and the recipient. In lieu of monetary employee awards, other types of awards may also be made to employees. Refer to the Human Resources Policy: Staff Recognition Awards and Gifts for additional information.

 

II. Payroll Taxes and Fringe Benefits

Monetary awards received by employees are taxable income to the recipient, regardless of the dollar value. The recipient of the award or the issuing department must cover the tax liability. In addition, the fringe benefit rates will be applied to the total transaction amount (gift plus gross-up, if applicable, creating an incremental cost to the issuing department.

Departments have the following options regarding the payment of the related payroll taxes and fringe benefit assessment.

• The full transaction amount will be included in the employee’s W-2, and the employee will be responsible for the associated tax liability. The applicable taxes will be deducted from the employee’s paycheck. Fringe benefits will be charged based on the face value of the monetary award.
• The department can elect to pay the related payroll taxes (federal, state, and FICA taxes) for the employee by “grossing-up” the transaction amount to be included in the recipient’s W-2. Fringe benefits will be charged based on the “grossed-up” amount of the monetary award.

In the event that departments elect to use monetary awards, they should inform the employee that the award will be included in their taxable income. In addition, they should notify the employee if he/she will be responsible for the taxes.

Gifts and awards of non monetary awards (example: cups, mugs, turkey, caps, and shirts) are generally considered non-taxable to the recipient unless the approximate Fair Market Value is clearly $100.00 or greater or the items are provided frequently. Non monetary awards are charged to G/L account 693200 Public Relations and Social Expenses.

 

III. Payment Processing

Employee awards must be approved in advance by a Dean, Director or Department Head.

Awards may be purchased by using the Duke Procurement Card or reimbursed by using the Miscellaneous Reimbursement form. Refer to GAP 200.021. The purchase of monetary awards must be charged to G/L account 691800 Contributions and Prizes . The Duke Procurement Card is the most preferable method for this type of purchase. All gifts or awards purchased with personal funds may be reimbursed using the Miscellaneous Reimbursement form. The responsible department must provide the names and social security numbers or Duke unique identification numbers of each recipient to facilitate tax processing for monetary awards.

 

IV. Other Considerations

Sponsored Project funds may not be used for general recognition of staff members. Incentives to Duke staff members participating in grant funded trials or studies are allowable costs to the Grants with Grantor approval. Gifts and awards purchased using sponsored funds will be subject to the documentation requirement of providing the names and social security numbers or Duke unique identification numbers of each participate regardless of fair market value.

 

V. Resources

Contact Employee Travel and Reimbursement with questions about the taxation of employee monetary awards.

Refer to the Human Resources Policy: Staff Recognition Awards and Gifts for additional information.