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Q&A: Are Employee Service Awards Taxable?

A qualified employee achievement award must meet a number of requirements.

Our church is considering an employee service awards program for rewarding employees who have worked a specified number of years for our church. A member of our governing board has asked if these awards would be taxable income to the employees?

Qualified employee achievement awards are not taxable to the employee. A Qualified employee achievement award is one that meets the following requirements:

(1) The award is tangible personal property (not cash, gift certificates, or securities);

(2) The award is given to an employee for length of service or safety achievement;

(3) The award is presented as part of a meaningful ceremony, and under circumstances that do not indicate that it is disguised compensation; and

(4) The amount that is not taxable is limited to the employer's cost and cannot be more than $1,600 ($400 for awards that are not Qualified plan awards) for all such awards received ...

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  • January 1, 2010

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