Discussion:Prizes & awards
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Discussion Forum Index --> Basic Tax Questions --> Prizes & awards
Discussion Forum Index --> Tax Questions --> Prizes & awards
| 12 May 2008 | |
| Morning,
Client asking how a prize or award is taxed. My understanding of it is that there's usually a 1099-misc form issued and it's taxable as miscellaneous income but not subject to SS tax. The employer says not so and wants to include it as regular pay subject to SS. I've not found an answer after looking for it so might someone set me straight. Thanks much. | |
RoyDaleOne (talk|edits) said: | 12 May 2008 |
| Prizes or awards from employers are treated differently from prizes such as game show winnings.
The employer is mostly likely correct. | |
| May 12, 2008 | |
| Gifts/awards/bonuses - any of those items given to employees are generally required to be included in W-2 wages. The assumption is that any of these are connected to work performed for the employer(ie earned income subject to SS tax). Would the prize or award discussed in your original post be connect to outstanding performance on the job? See the connection? | |
TheTinCook (talk|edits) said: | 12 May 2008 |
| It depends on where the money is coming from. If the money comes from a vendor, then the payment isn't subject to employment taxes and gets reported on a 1099-Misc Box 3, even if the employer is an intermediery for the money. See Rev Rul 70-337.
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| 12 May 2008 | |
| Dickens
You didn't say what type of award. I assume it is not disguised compensation. Check out §274(j)- special rules for employee achievement awards. | |
Michaelstar (talk|edits) said: | 12 May 2008 |
| You might also want to look at Pub 15-B - "Employer's Tax Guide to Fringe Benefits" in conjunction with the excellent sites provided above. | |
Death&Taxes (talk|edits) said: | 12 May 2008 |
| I suppose the question is, as TC notes, who is actually paying the prize. You note what the employer told you but you did not say if the employer was paying it in its own right, or being a conduit for someone else [remember spiffs payments from tire companies?]. | |
