Gifts/Awards

Employee/Student Gifts - Cash or Cash Equivalents

Gift cards,  gift certificates, cash, use of credit or charge cards, and other cash equivalents are taxable income to the employee/student regardless of value.   As a result, giving of these items is not allowed.  However, certificates such as as free Cici's Pizza buffet for a student incentive or award  is OK as long as the certificate does not indicate any money amount; just a free item.  Even though the certificate does not have a monetary value, it should not be redeemable for over $25 of food.

Employee/Student Gifts - Non-Cash Gifts of Personal Property

No school district funds may be used to purchase gifts for employees.  This includes personal occasions such as birthdays, secretary's day, valentines day, Christmas, Thanksgiving, etc.

Administrative Regulation CFD-R (Local) Accounting: Activity Funds Management addresses gifts and awards to employees.

GIFTS

 “Activity funds may not be used to purchase gifts for students or employees. A gift is a gratuitous offering for personal benefit that does not serve a legitimate educational interest. For example, birthday presents, or Christmas Holiday presents and acknowledgments for other personal occasions are considered gifts. Employees and students may, however, donate personal funds to be applied toward the purchase of a gift.”

If a book or some other educational related merchandise is purchased for an employee, it is not considered a personal gift and thus can be purchased with activity funds raised with Teacher Lounge Vending machines.  According to the IRS, these items may not exceed $25 per person.

Employee/Student Achievement Awards

The tax rule on service awards allows employers to give employees "achievement awards" that are not taxable in honor of employment anniversaries in increments of five years (for example, after five, 10, or 50 years of service) or safety awards that are not given to more than 10 percent of the company's employees in any year.  As with the de minimus rules, the award cannot be cash or a cash equivalent, and any award that does not qualify as an employee achievement award must be added to the employee's income.  IRS regulations, however, would allow an employee achievement award to consist of a nonnegotiable certificate.  This certificate entitles the person to receive only specific tangible personal property.  However, a person with five years of service in a company could probably choose one item from a very limited selection of nominally valued awards, such as a key chain or a pocket knife.  Just be aware that entitling an employee to receive an item is not the same as letting an employee choose an item.  A gift certificate to purchase any item in a store or catalog is still a cash equivalent that is taxable income to the employee.

Recognition of Special Effort or Outstanding Performance or Incentive Awards - Non-cash awards, such as plaques, certificates (not cash), books, flowers or similar items are not taxable if they are $100 or less.  An employee may only receive these awards twice in one calendar year to be considered non-taxable.

“Incentive programs are permissible as long as they are designated to achieve a legitimate educational benefit. For example, programs designed to address a situation negatively affecting the educational program, such as teacher or student absenteeism, employee turnover, or poor reading skills, may be conducted and campus activity funds may be used to purchase incentive awards in connection with such programs. Incentive awards cannot be cash or readily converted into cash (e.g., savings bonds, money orders, refundable tickets, gift cards, or gift certificates redeemable in cash, etc.). Incentive awards shall not exceed a value of $100 per person per school year unless the principal obtains written approval to do so from the Superintendent or his/her designee.”

According to the IRS these awards for recognition must be non-cash awards, such as plaques, spirit shirts, books, flowers or similar items and must be less than $100 per person.  An employee may only receive these awards twice in one calendar year to be considered non-taxable.  Gift certificates or gift cards are not allowed.  In giving gifts and awards to your employees with activity funds, proper discretion should be exercised as these are school district funds and subject to public scrutiny.

Length of Service Awards - These awards must be part of a meaningful presentation and given to an employee no more than once every five (5) years.  Non-cash awards of $400 or less are not taxable.

Safety Awards - Non-cash awards (up to $400) given to employees directly involved are not taxable.  Any safety awards given to managers, administrators, other professional employees or clerical staff not directly involved with the safety performance will be fully taxable.

Retirement Awards - Retirement gifts may be excluded from income if the dollar amount of the gift relates to the retiree's length of service.  Documentation is to be provided describing the relationship between the retiree's length of service and the value of the gift.

1.  Timing - The length-of-service/retirement award may not be made within the employee's first five years of service or more frequently than every five years.  Length-of-service and/or retirement awards given other than the minimum timing or more often than the 5-year interval will be taxable in full and must be reported.
    

2.  Dollar Limit - The value or cost of the award should not exceed $400.  Also, it is recommended that the value or cost of the award be commensurate with the number of years of service being recognized (e.g., the 15-year service award is greater than the 10-year service award).  Length-of-service or retirement awards with a value or cost over $400 will be taxable to the extent the value or cost exceeds the dollar limit (e.g., if a $450 award is given, then $50 will be taxable).  If the staff employee elects to retire the same year he/she becomes eligible for a length-of-service award, then the maximum value or cost of the award(s) should not exceed $400 for the award(s) to be nontaxable.
    

3. Form of Awards - The award must be in the form of tangible personal property.  If a gift certificate is given, then it should be one that requires the recipient to purchase or exchange the certificate for tangible personal property or service from the issuing vendor.  It cannot be a gift certificate that is convertible to cash or used to reduce the balance of the recipient's account with the company issuing the gift certificate.  If the award is in the form of cash, check, or items that can be easily converted to cash, the value of such items is treated as additional wages regardless of cost or value.
    

4.  Meaningful Presentation - The award must be presented as part of a special event or celebration that marks the occasion, such as a departmental meeting, party, or luncheon.  Every attempt should be made to give a length-of-service/retirement award during the year the anniversary occurs.  To avoid tax liabilities to the attendees, departments or schools should ensure that special presentation events are conducted only on an occasional basis and that the costs of the events are reasonable.

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Last modified: 11/09/2011