Tax Implications Of Recognition Rewards: Q&A with best-selling author Bob Nelson
Some companies shy away from using recognition awards because of a fear of potential tax implications. Much of this fear is unwarranted and can be set aside by understanding the relevant guidelines from the tax code regarding employee awards.
Q: How are most employee awards taxed?
Q: How can we give employees tax free awards?
Special deduction limits apply to these awards, provided they are given as part of a presentation under circumstances indicating they are not a form of disguised compensation. These types of awards include, but are not necessarily limited to: length of service awards, safety achievement awards, group travel awards and clothing allotments.
Q: What are the rules regarding length of service awards?
Q: How should we handle safety achievement awards?
Q: Are group travel awards deductible?
Q: How much is allowed under the tax code for clothing allotment gifts and awards?
Q: Should we shy away from taxable rewards?
It is important to remember that a rewards program should be designed, so it does not cost the company or the award recipients any unexpected taxes.
An excellent and effective strategy may be to make use of non-monetary awards when appropriate. After all, what employees want the most is to be valued for a job well done by those they hold in high esteem.
Bob Nelson is President of Nelson Motivation, Inc. He is the author of the best-selling books, 1001 Ways to Reward Employees, 1001 Ways to Energize Employees, and the new 1001 Ways to Take Initiative at Work, all published by Workman Publishing.
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