Employee Achievement Awards, Gifts, and Prizes
There are specific rules for achievement awards, gifts, and prizes provided to employees that must be followed to ensure the University’s compliance with IRS regulations. In addition, de minimis gifts to employees are only permitted from University of Florida Foundation and Academic Enrichment Funds within their prescribed policies.
Reason for Directive
The purpose of this directive is to comply with University of Florida Policies and Internal Revenue Code (IRC) Section 132(a)(4), which allows for an exclusion of specific de minimis fringe benefits from an employee’s taxable income.
Who must comply?
All university departments.
Achievement Awards include the value of any tangible personal property (not cash) that the University gives to an employee as an award for length of service or safety achievement.
Achievement Awards may be excluded from an employee’s income when they are within the University and IRS guidelines. Gifts of cash, cash equivalents, gift certificates, meals, lodging, tickets, and vacation packages do not qualify to be excluded from the employee’s income. Achievement awards cannot discriminate in favor of highly compensated employees and must meet the following IRS criteria:
- Be given for length of service or safety achievement
- Be tangible personal property (not cash or cash equivalent gift cards/certificates)
- Be given under conditions and circumstances that do not create a significant likelihood of the payment being disguised compensation
- Be awarded as part of a meaningful presentation
- Be no more than the specified dollar limits (generally, $400 maximum per employee annually)
- For Length of Service
- Must be given after the employee’s first five years of employment
- Must not be given to an employee who has received another length of service award during the same year or in any of the prior four years
- A traditional retirement award is an allowable exception to the five-year rule
- For Safety Achievement
- Cannot be excluded if awarded to a manager, administrator, clerical employee, or other professional employee
The facts and circumstances for any achievement awards exceeding $100 must be directed, in writing, to University Tax Services for review.
Gifts that are de minimis (of low value and infrequently provided) may be excluded from employees’ wages. Cash and cash equivalents, no matter how low in value, are never excludable as a de minimis fringe benefit. The following are examples of de minimis fringe benefits that may be excluded from an employees’ wages when provided by the employer:
- Holiday gifts, other than cash, with a low fair market value
- Employer-provided meals, if:
- they are furnished on the University’s property,
- are furnished for the University’s convenience,
- and the employee accepts it as a condition of employment
- Occasional meals or meal money allowing an employee to work beyond normal hours
- Occasional snacks, coffee, doughnuts, etc.
- Occasional tickets for entertainment or sporting events
- Flowers or fruit provided under special circumstances (e.g. for a funeral)
Prizes and Awards
A prize or award that is not cash or cash equivalent, of nominal value (less than $100) and provided infrequently is excludable from an employee’s wages. Prizes or awards that are given frequently do not qualify as an excludable de minimis award, even if each award is small in value. Examples of excludable de minimis awards include:
- Nominal gifts for birthdays or holidays
- Holiday turkeys and hams
- Flowers, plaques, coffee mugs for special occasions
- A watch at retirement
If a gift, prize, or award is given frequently or exceeds the de minimis value, the entire amount is included in the employee’s wages, not just the portion that exceeds the de minimis value.
De Minimis Benefit
IRS Publication 15-B states that a de minimis benefit is any property or service you provide to an employee that has so little value (taking into account how frequently you provide similar benefits to your employees) that accounting for it would be unreasonable or administratively impractical. While the IRS does not define a de minimis value, it has advised at least once that a benefit valued at $100 did not qualify as de minimis.
Readily convertible to cash, for example, a voucher for merchandise, gift card/certificate, or savings bond.
01/31/2021: reviewed content
Tax Services: (352) 294-7266