Union College is committed to compliance in all areas of its operation. Accordingly, the practices set forth below ensure that we find meaningful ways to recognize our students and employees, while also complying with IRS regulations. The Internal Revenue Code states that under certain circumstances the value of prizes and awards/gifts to individuals is considered taxable income. Non-US citizens may be subject to additional tax rules, depending on circumstances and treaty status.
The taxable period is the calendar year, i.e. January 1 through December 31
Reason for the Policy
This policy applies to all faculty, staff, students and non-employees and is intended to clarify the circumstances when gifts, prizes, and awards may be appropriate, along with procedures for submitting recipient information to Finance, and the corresponding tax treatment.
This policy does not cover or pertain to scholarships awarded by Union College.
Definitions & Terms
Award - Cash or noncash items given for exemplary performance or productivity and given in recognition of an accomplishment, achievement, or activity that is tied to a vital business reason.
Cash - Currency, coin, checks, credit or debit card recordings, bank notes, bullion, traveler’s checks, registered checks, and money orders.
Cash Equivalent - An instrument used in lieu of cash but in the same manner. Cash equivalents at Union include gift cards, campus cash, and reloadable debit cards
De Minimis - Gifts, prizes, or awards so small in value that it is not reasonable or practical to account for their value. Cash and cash equivalents are never considered de minimis as defined by the IRS. For College purposes, de minimis is defined as non-cash items having a value of $100 or less and must be provided on an occasional basis.
Gift - Items given to express appreciation or gratitude, not related to job performance, and no negotiation conducted in advance.
Prize - Cash or noncash items received as a result of a game of chance, drawing, or contest of skill, either with or without the purchase of a chance or ticket.
Promotional item - A product branded with the college logo or slogan and distributed at little or no cost to promote the college, the identity, or a specific event or department.
Raffle - Game of chance in which a participant pays money in return for a ticket or other receipt and in which a prize is awarded on the basis of a winning number or numbers, color or colors, or symbol or symbols designated on the ticket or receipt, determined by chance as a result of a drawing from among those thickets or receipts previously sold (NYS General Municipal Law, Section 186.3-b).
Tangible - Any non-cash item provided to an employee/student in recognition of performance, length-of-service, or safety record. Examples include: flowers, books, trophies, plaques, event tickets, food, etc.
Taxable Prize or Award/Gift Form
Union College complies with all IRS regulations concerning the giving of prizes and awards/gifts to faculty, staff, and students of the College. The Taxable Prize or Award/Gift Form collects required information to report the taxable portion of a prize or award/gift.
Any prize or award/gift that appears in the ‘Taxable” column of the Allowable Prizes and Awards/Gifts table must be reported via the Taxable Prize or Award/Gift Form.
Other than the limited exceptions, a gift or an award is considered supplemental wages
by the IRS. Therefore, it must be processed through the payroll system with the appropriate taxes
withheld and will be included in the recipient’s Form W-2 (or Form 1042-S if they are a nonresident alien).
- If an employee wins a prize for a reason not related to their employment and the contest, program or raffle is open to the general public, the prize amount is treated as 1099 income. The recipient will receive a Form 1099-MISC on any winnings totaling over $600.00 in a calendar year.
- For students, if the prize or award is related to employment services performed for the college (e.g., outstanding student worker in a department), the prize or award must be processed as supplemental wages via Payroll, with appropriate income taxes withheld. However, if the award is not related to services performed as an employee (e.g. academic achievement, contest), it is still taxable income to the recipient and must be reported on Form 1099 (*in this case, it is not subject to withholdings).
- For non-employees, the prize or award can be processed without tax withholding but is still considered income to the recipient. Such payments are reported as taxable income to the recipient using Form 1099, Miscellaneous Income. Accounts Payable will require a W-9 be provided before the award is processed.
All awards, regardless of dollar amount, must have a valid, documented business purpose and must comply with Union College purchasing, expense and approval procedures.