Awards, Prizes and Gifts - Procedures
Awards, prizes and gifts (excluding raffles) that are presented to University faculty or staff are generally subject to tax withholding. The value of the award, prize or gift will be included in the individual's Form W-2, Wage and Tax Statement in the tax year it is received. These acknowledgements are also subject to FICA taxes; however, an exception for FICA taxes applies to certain student-employees (see Standard Practice Guide 201.24: Employment of Students).
The Internal Revenue Code (IRC) provides exceptions for certain awards, prizes and gifts made to employees. Examples include:
- an in-kind gift for an employee as part of an employee achievement event (e.g. a $200 plaque)
- a $25 gift certificate to an employee for books at a designated local bookstore that is non- transferable and non-refundable
- an award that qualifies as a "de minimis" fringe benefit
- traditional retirement gifts
- a safety achievement award
For information about the taxability and payment processing, see the "Prizes, Gifts and Awards Decision Process".
For exceptions to taxation, refer to the Policy on Taxation of Gifts, Prizes and Awards for Employees.
For awards, prizes and gifts given to student as the result of their student relationship (rather than employee relationship), contact the Office of Financial Aid for information about making the payment or recording the value of the item.
Requesting Payment - the department requests a payment to be made to the recipient from the payroll or procurement system.
To request the payment of an award, prize or gift to an individual, use the "Request or Record Payment of Awards, Prizes or Gifts" form available in PeoplePay (via University Business in Wolverine Access). Based on the employment relationship of the individual with the University and the individual's citizenship, the payment will be made either in the payroll or procurement system. Instructions for completing and routing the form to the appropriate central office are provided.
The department presents the award, prize or gift directly to the recipient and reports the taxable income accordingly.
To record the value of an award, prize or gift given to an individual, the department should use the same form, i.e. "Request or Record Payment of Awards, Prizes or Gifts" form. Note that the form should be completed within 10 days of the presentation. Instructions for completing and routing the form to the appropriate central office are provided.
For awards, prizes or gifts given directly to faculty and staff, the Payroll Office will charge the department that presented the award, prize or gift for the taxes that will be incurred by the recipient, in addition to recording the value as taxable compensation. For payments made to other individuals, Procurement Services will record the value for possible reporting at calendar year-end.
For departments that process greater than 50 awards for faculty and staff during any one month or quarter, the administrative burden is such that the value and taxes will not be entered manually by the Payroll Office. The department should contact Payroll at 734-647-3988 for instructions for processing the batch load.
To determine financial impact of grossing up a payment use the Gross Up Calculator.
For more information on Awards, Prizes and Gifts, see SPG 501.12.