About this Policy
Awards, Gifts & Prizes
Policy Number: 22307
Dec 12, 2017
UM System Controller's Office
UM System Controller
- Reason for Policy
- Policy Statement
- Related Information
This policy defines Awards, Gifts and Prizes and identifies when it is appropriate to pay for them.
To ensure the proper recording of Awards, Gifts and Prizes as well as to ensure that each type of payment is taxed, if appropriate.
Awards, Gifts, and Prizes are allowed to the extent the expense is reasonable and necessary to carry out the mission of the University. They may not be lavish or extravagant, and must comply with any funding source restrictions. Proper classification of payments is necessary to differentiate between those considered scholarships, which may be tax free, and those that are Awards, Gifts, or Prizes, which may be taxable.
Awards and Prizes may take the form of cash, non-cash items, gift certificate or gift card. Payments in the form of a Gift must be in the form of non-cash items.
Awards to Employees
Awards paid to employees is governed by Human Resources policies. However, the Award must be reported as employee compensation on the employee's Form W-2 and is subject to federal withholding and FICA taxes. The Award must be recorded in the payroll system, the department presenting the Award must notify payroll unless the Award qualifies for one of the exceptions below.
- Certain Achievement Awards of tangible property (not cash or gift certificates)
- Noncash, de Minimis Awards
IRS guidelines dictate that if an employee is given the choice of taking an Award as cash or having the Award amount put into a university account to support their work (travel, research, etc.), the amount is taxable to the employee in either case. Awards that an employee opts to have put into a university account will be taxed as taxable perquisite. Awards that are put into a university account must only be spent for a valid business reason and must be in compliance with University policies. If the employee is not given the choice of taking the Award as cash (the Award can only be a contribution to a university account to support their work), then it will not be considered taxable to the employee.
Awards to Non-employees
Awards given to nonemployees are generally considered reportable as taxable income, regardless of value. Noncash Awards to nonemployees that have little intrinsic value, such as medals, trophies, and plaques are not reportable. The University will file a Form 1099-MISC to report the Awards when the value of cash and the fair market value of noncash Awards to an individual total $600 or more in a calendar year. The taxpayer identification number (e.g., Social Security number) must be provided for reporting purposes.
Note: granting/Awarding financial aid is not considered an Award for purposes of this policy. Awards to students that are related to academic performance are considered financial aid and, as such are not subject to the provisions of this policy.
To qualify as a gift, there should be no negotiation in advance for the gift. Cash and gift cards or certificates redeemable for cash, are not allowed as Gifts. Gifts should be of nominal value and, ideally, bear the University's licensed logo. Gifts less than or equal to $100 are usually not reportable to the IRS.
- To Employees: In limited circumstances, Gifts to employees are allowed if approved by the President, Chancellor or designee, use unrestricted non-operating funds or restricted gift funds approved for that purpose, and it can be demonstrated to be in the University’s best interest. Gifts including those for birthdays, weddings, showers, and other personal events - are usually not allowable expenditures of University funds. At their discretion, co-workers may contribute personal funds for this purpose.
- To Non-employees: Noncash Gifts may be presented as a token of appreciation to a donor, dignitary, guest, volunteer, visitor (or in certain circumstances, customer or client) when a valid and documented business purpose exists such as to recognize contributions to the University or to honor a distinguished visitor. Examples are token items given to donors by the Alumni Association or mugs given to conference attendees.
Cash and noncash Prizes may be awarded to individuals for participation in Games of Chance or contests of skill. Raffles and Games of Chance must be approved by campus Division of Finance. Examples of contests of skill include an essay-writing contest and basketball shooting contest. In certain instances, the purchase of a Chance or Ticket may be required.
Prizes may only be awarded where benefits are expected to accrue to the University, such as a fund raising event. No prize may be awarded to a University employee except where the individual’s employment is incidental to the basis in which the prize is awarded. For example, a University employee would be eligible to win a door prize awarded at random or an essay-writing contest.
The department or organization sponsoring the contest must maintain detailed records of all receipts and expenditures associated with the contest, including the winner’s name, address, taxpayer identification number (e.g., social security number), amount spent for a Chance or Ticket (if any), and the value of the prize won. All contests associated with Games of Chance or skill must be conducted in accordance with Missouri state law.
The University must report prize winnings to the IRS and to the recipient on a calendar year basis. Federal regulations also require that a specific percentage of the winnings must be withheld under certain conditions. Noncash winnings will be reported at their fair market value.
Awards, Gifts and Prizes to Non-resident Aliens
Prizes and Awards to nonresident aliens are generally subject to 30% withholding and reported to the IRS. You must contact the Nonresident Alien Tax Specialist on your campus before processing cash or noncash Awards, Gifts, and Prizes to persons who are not U.S. citizens or legal permanent residents.
Awards - cash, gift certificates, or noncash merchandise given for meritorious performance, productivity, or other reasons connected with employment; or for nonemployees, given in recognition of an accomplishment, achievement or activity that does not require the performance of a service, as well as for other valid business reasons.
Certain Achievement Awards - Awards of tangible property (not cash or gift certificates redeemable for cash) that are not reported as taxable to an employee. The Award must be awarded in a meaningful presentation that emphasizes the purpose of the Award. The value of the Award funded by the University may not exceed $400 per year per employee. These may include the following:
- Length of Service Award - is not reported as taxable if it is not granted to an employee more frequently than every 5 years. A retirement gift generally will not be reported as taxable.
- Safety Award - is not reported as taxable so long as the Award if the following conditions are met:
- It is provided to no more than 10% of eligible employees; and,
- Managers, administrators, clerical, and professional staff are ineligible for the Award.
Games of Chance - raffles and/or door prize events where no consideration is required to be given for the opportunity of participating.
Gifts - noncash items of nominal value given to express appreciation or gratitude; not related to job performance and no negotiation conducted in advance.
Noncash, de Minimis Awards – non-taxable Awards to an employee. For University purposes, de Minimis is defined as having a value less than or equal to $100. Gift certificates and gift cards are considered cash Awards for purposes of this policy, and do not meet the de Minimis Award exception.
Prizes - cash or items of value received as a result of a Game of Chance, drawing or contests of skill, either with or without the purchase of a Chance or Ticket.
Ticket or Chance - something of value that is given to participate in a game or contest.
UM System Controller’s Office:
Issuing W-2s or 1099s as appropriate on taxable items
Campus Finance Office:
Approving raffles and Games of Chance.
Accounts Payable Shared Services:
Recording of payments that are taxable within the University’s financial system
Notify and report to Campus Accounting any Awards paid to employees
|Type||Recipient||Form Used to Report to IRS and to Recipient||Cash,Gift Cards and Gift Certificates||Other: Less Than or Equal to $100||Other: Greater Than $100|
|Award||Employee||W-2||Reported as Taxable||Not Reported as Taxable||Reported as Taxable|
|Award||Nonemployee||1099-MISC||Reported as Taxable||Reported as Taxable||Reported as Taxable|
|Gift||Employee||W-2||Not Allowable||Not Reported as Taxable||Reported as Taxable|
|Gift||Nonemployee||1099-MISC||Not Allowable||Not Reported as Taxable||Reported as Taxable|
|Prize (with purchase of ticket or chance)||Employee||W-2G||Reported as Taxable||Not Reported as Taxable||Reported as Taxable|
|Prize (with purchase of ticket or chance)||Nonemployee||W-2G||Reported as Taxable||Not Reported as Taxable||Reported as Taxable|
|Prize (no purchase of ticket or chance)||Employee||W-2||Reported as Taxable||Not Reported as Taxable||Reported as Taxable|
|Prize (no purchase of ticket or chance)||Nonemployee||1099-MISC||Reported as Taxable||Reported as Taxable||Reported as Taxable|
Formerly Business Policy Manual 216 – Awards, Gifts, & Prizes (revised 3/16/2015)