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one_pirate
New Member

Do I have to pay federal tax of a LENGTH OF SERVICE AWARD PROGRAM

 
1 Reply
SamiaI
New Member

Do I have to pay federal tax of a LENGTH OF SERVICE AWARD PROGRAM

It depends, in some cases, up to $1,600 of employee achievement awards can be excluded from taxable income, if it's non cash, a gift certificate, or other cash-equivalent item. It must be given for length-of-service or safety achievement.

The amount that the employee can receive tax free is limited to the employer's cost and cannot exceed $1,600 ($400 for awards that are not qualified plan awards) for all awards the employee receives during the year.

In addition, the employer must make the award as part of a meaningful presentation. The tax-free employee achievement award exception does NOT apply if:

  • The length-of-service award is for less than five years of service or if the employee received another length-of-service award during the year or the previous four years.
  • The safety achievement award is given to a manager, administrator, clerical employee, or other professional employee.
  • More than 10 percent of eligible employees previously received safety achievement awards during the year.

   

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