Recognition awards, including gift certificates, are often given to acknowledge employee achievement. Standard purchasing procedures are used to purchase gift certificates. (Note: Gift certificates purchased at University Bookstore require the use of a purchase order.)
Common reasons for recognition include:
Employee recognition programs should be documented and describe the types of achievement or service for which recognition awards, including gift certificates, may be made. Managers are encouraged to consult their Human Resources Consultant for assistance in establishing an employee recognition program.
Agencies of the state of Washington are allowed to provide recognition awards to state employees of up to $200 per employee per award if there is a formal, written program (see RCW 41.60.150). Where discretionary funds (64-xxxx) are available, and their use is consistent with unit recognition policy, the $200 limit may be supplemented. Questions about discretionary funds and limits on their use should be addressed to Karen Long.
Formal programs are described at:
While the Washington State Constitution prohibits state employees from receiving bonuses, i.e. increases in compensation after services have been rendered, monetary awards are allowed when they are made according to a recognition policy that is in place prior to the performance of the work for which the payment is being awarded.Gift certificates that can be converted into cash, in whole or in part, are always taxable to the recipient for the full value. If gift certificates that are redeemable only for merchandise are less than or equal to a de minimis amount of $75, they are not taxable; otherwise, such gift certificates that are redeemable only for merchandise are taxable. Report to the Payroll Office only those gift certificates which are determined to be taxable per the preceding guidance; the Payroll Office will then include in the employee's taxable income the value of those taxable gift certificates. To report the taxable gift certificate information, please send an e-mail to pr-tax@u.washington.edu and include in the e-mail the recipient's name, UW Employee ID number, and the amount of the gift certificate.
Departments that award gift certificates to employees will need to document on the check request whether a gift certificate converts or partially converts to cash.
Units that purchase cash converting gift certificates before determining who will receive the certificates, or that purchase certificates using a Procard, must provide a quarterly listing to the Payroll Office of the eventual certificate recipients. For the fourth quarter, the list of certificate recipients must be submitted by November 30. In order to report the taxable gift certificate information to the Payroll Office, please send an e-mail to pr-tax@u.washington.edu and include in the e-mail the recipient’s name, Employee ID number, and the amount of the gift certificate. All other cash converting gift certificates will be reported to Payroll by Accounts Payable. The Payroll Office manually adds to an employee's gross wage the value of any awards granted to an employee. Questions should be addressed to pr-tax@u.washington.edu.
Note: For tax reasons, cash converting gift certificates after November 30 of each year should be reported with the taxable income for the following year.
Questions regarding check requests should be addressed to Julia Shanahan.
Cash converting gift certificates awarded to nonresident aliens are subject to federal tax withholding. Withholding rates vary based on whether the recipient has applied and is eligible for tax treaty status and whether the treaty addresses such payments. The total amount of a cash converting gift certificate will be reported to the IRS on form 1042-S or W-2.
Accounts Payable process payments to nonresident aliens. Questions should be addressed to: nratax@u.washington.edu.
If the total amount cash of converting gift certificates and other cash awards made to any individual other than employees or nonresident aliens exceeds $600 in a calendar year, the total cash equivalent value of awards made to the recipient will be reported to the Internal Revenue Service on Form 1099-misc as other compensation.
Payments are handled by Accounts Payable. Questions regarding payment should be addressed to: ten99@u.washington.edu
You may also e-mail questions to: taxofc@u.washington.edu
