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.