Employees who handle cash and gift certificates must follow UI cash handling procedures.
University-funded cash awards to employees constitute gross wages and are subject to payroll tax withholding.
Cash Awards Procedures
- Professional and scientific staff, merit staff, and faculty who are rewarded for extra-meritorious performance must be awarded through the HR Transaction System using the appropriate special compensation form type.
- Cash awards to student employees must be processed through MAUI Scholarship Workflow.
Gift certificates, including gift cards, gift vouchers, etc., are considered cash equivalents by the IRS and, therefore, are treated as cash payments.
Gift certificates may not be given to employees to reward performance unless they are given under a University-wide sanctioned award program. (Procedures provided above under Cash Awards Procedures, #1)
Gift certificates given as research subject compensation do not fall under this Policy on Taxation of Gifts, Prizes, and Awards to Employees. They are included in the Research Subject Compensation Policy and Procedures.
Gift Certificate Limitations
- The cumulative value of all gift certificates given to a single employee must not exceed $500 within a calendar year (unless prior approval for an exception has been granted through the Chief HR Officer & Associate VP, Human Resources).
- University-affiliated and nonprofit organizations are preferred vendors for gift certificates.
- Gift certificates should not be used to recognize employees' personal events, such as births, weddings, birthdays, or holidays.
Gift Certificate Procedures
- Gift certificates awarded to non-student University employees, regardless of the amount, must be reported to University Payroll annually.
- Gift certificates awarded to student employees must be reported to the Office of Student Financial Aid (email@example.com), during the semester in which it is awarded. Additional information about processing student awards is provided on the Accounts Payable website at: https://ap-purchasing.fo.uiowa.edu/accounts-payable/evoucher/student-awards-prizes-and-other-similar-forms-payment
- To facilitate the reconciliation of the number and value of the gift cards on hand:
- Departments must maintain a log and record, at a minimum, the date, name of vendor, and number of gift certificates purchased by certificate amount.
- Departments must maintain a list of gift certificates given to employees, including gift date, purpose of gift, certificate amount, employee name, and University ID.
- Departments must submit the list as an Excel file to University Payroll by November 15 for awards given from November 16 of the previous year to November 15 of the current year.
- Gift certificates to employees who are leaving the University must be reported to University Payroll as soon as the gift certificate is awarded so appropriate payroll tax withholding can occur.
Non-cash awards (tangible personal property) given to employees are subject to taxation unless the annual value of all non-cash awards is less than $100 (amount considered de minimis) or the non-cash award meets one of the exceptions indicated in University Operations Manual, III-38.3.
Non-Cash Awards Procedures
- Departments must track the value of all non-cash awards provided to employees.
- If the annual cumulative value of non-cash awards for an employee exceeds $100, departments must submit the entire list of all non-cash awards (not just the amount exceeding $100). Departments should complete all sections of the Taxable Items Worksheet for Payroll Services and send as an attachment to University Payroll by November 15 for awards given from November 16 of the previous year to November 15 of the current year. (Note: 100 percent of the value of the gift is taxable, not the amount in excess of $100.)
- If the annual cumulative value of non-cash awards to a terminating employee exceeds $100, departments must submit the information to University Payroll as soon as possible so appropriate payroll tax withholding can occur.
Distinguishing Between Gift Certificates and Non-Cash Awards
When vouchers are awarded on an occasional basis, it is sometimes difficult to distinguish between taxable gift certificates and non-taxable non-cash items.
Examples of taxable vouchers are those that provide options for the employee:
- A drink of choice
- A meal of choice
- A snack item
Examples of non-taxable vouchers are those that identify specific items:
- A coffee
- A soda
- The special of the day
- A bag of chips