Accounts Payable provides guidelines for following University policy.
Payments to individuals for services, appreciation, recognition, prizes, and awards are considered taxable income to the recipient. The amount of the payment will be subject to tax withholding and reported to HR for inclusion on Form W-2 for employees or reported on Form 1099-MISC if the recipient is not an employee of the University.
These types of payments must only be made directly to the individual from the University (via Accounts Payable or Payroll via Purchasing Card, check or direct deposit) to ensure compliance with Internal Revenue Service (IRS) requirements. Payments made by third parties to individuals for services, prizes, awards, gifts, or giveaways are not permitted and will not be reimbursed by the University.
Form W9 (Request for Taxpayer Identification Number and Certification), or a University ID number for employees/students, must be submitted to the Accounts Payable department for any gift, prize, award, or giveaway provided by the University as outlined in Cash Equivalents and Non-Cash Awards to comply with tax reporting regulations.
If a gift, prize, award, or giveaway is distributed to an ineligible recipient or Form W9, or University ID number, is not provided to the Accounts Payable Department, the purchase will be considered a gift from the individual instead of the University, and therefore cannot be purchased or reimbursed by the University. (University Handbook.)
The IRS specifically defines gift certificates, gift cards, and any financial instruments redeemable for cash as cash equivalents and states that the value of these items is considered taxable income to the recipient regardless of dollar value. (IRC §274(j)(3)(A); Reg. §1.132-6)
Non-cash gifts, awards, prizes and giveaways are also considered taxable income and reported at the fair market value of the item. If the unit cost of an item is less than $50, then it will be considered de minimis*** and excluded from reporting.
The value of work clothing provided by the employer is not taxable to the employee if:
The employee must wear the clothing as a condition of employment; AND
The clothes are not suitable for everyday wear
Since apparel for employees may be considered taxable income, the purchase must be identified regardless of dollar value
This chart summarizes the University’s tax reporting requirements and information required for such purchases:
Payment Type | Recipient | Dollar Limits | Information Required |
Gift Card/Certificates and other Cash Equivalents | Non-Employee | Must be reported regardless of dollar value | |
Gift Card/Certificates and other Cash Equivalents | Employee and Students | Must be reported regardless of dollar value | Names and University ID numbers attached to payment documentation |
Non-cash Gifts, Awards, Prizes, Giveaways, etc. | Non-Employee | Report when total expense is greater than or equal to $50.**
If total expense is $49.99 or less, it will be considered de minimis*** and excluded from reporting. | |
Non-cash Gifts, Awards, Prizes, Giveaways, etc. | Employee and Students | Report when total expense is greater than or equal to $50.**
If total expense is $49.99 or less, it will be considered de minimis*** and excluded from reporting. | Names and University ID numbers attached to payment documentation if over dollar limit |
Apparel | Employee | Must be reported regardless of dollar value | Names and University ID numbers attached to payment documentation |
Apparel | Non-Employee and Students | Report when total expense is greater than or equal to $50.**
If total expense is $49.99 or less, it will be considered de minimis*** and excluded from reporting. | Names and University ID numbers attached to payment documentation |
*Note: Form W9 may only be submitted by a U.S. citizen or other U.S. person as defined by the IRS. If an individual does not meet that criteria, then he or she should not fill out Form W9 and must not receive any cash equivalent from the University until tax ramifications have been researched and the disbursement has been approved by Accounts Payable.
**Recipient information is not required for the purchase of plaques because they cannot be easily converted or otherwise used to benefit the individual(s) in a material or quantifiable way.
***De minimis - must be infrequent AND of minimal value (IRC §132(e); IRC §274(j)(3)(A); Reg. §1.132-6)
USI’s policy defines infrequent as no more than once per month
USI’s threshold for minimal value for tangible property is $50