Cornell units wishing to give a gift, prize, or award should understand that providing these items results in specific tax consequences.
Gifts: A gift is something given as a present.
For example, supervisors may seek to recognize employees by providing gifts. Unfortunately, the Internal Revenue Service (IRS) interferes with this type of employer generosity by classifying most gifts, prizes, and awards as taxable income. The IRS classifies gifts from an employer to an employee as taxable income subject to W-2 reporting and tax withholding, unless they are gifts of property valued at $25.00 or less. This exception applies exclusively to gifts of property. It does not apply to cash or gift certificates, which are viewed as "cash equivalents."
Prizes: A prize is something that is awarded in a contest or won by chance.
Many prizes at Cornell are supported by an endowment and paid to students. Prizes are taxable income to the recipient and reported on an IRS Form 1099.
Awards: An award is something that is bestowed for performance.
The IRS classifies most awards from employers to employees as taxable income subject to W-2 reporting and tax withholding. There are two exceptions. An employer can provide "tangible personal property" (not cash or gift certificates) valued at $400.00 or less for longevity of service or for "safety" without triggering taxable income. Cornell's guideline for recognition of longevity of service is $10.00 per year of service.