This list outlines handling various types of bonuses, gifts, prizes, and awards within payroll tax regulations for 2023.

  1. Bonuses:
  • Cash bonuses, regardless of amount, are considered wages subject to various taxes.
  • Discretionary bonuses, decided solely by the employer and not contractually obligated, are excluded from overtime calculations.
  • Nondiscretionary bonuses, required by contract or agreement, must be added to weekly gross pay for overtime calculations.
  1. Signing and Related Bonuses:
  • Bonuses for signing or canceling employment contracts are considered wages subject to applicable taxes.
  1. Cash Prizes and Awards:
  • Fair market value (FMV) of prizes and awards, not the cost, is included in wages, and all applicable taxes are applied.
  • Prizes and awards related to on-the-job achievements are included in straight-time pay for overtime premium calculation.
  1. Length-of-Service or Safety Awards:
  • Length-of-service awards can be excluded from federal taxable wages under certain conditions.
  • Safety awards are excluded from federal taxable wages under specific criteria, including not exceeding 10% of eligible employees.
  1. Suggestion Awards:
  • Excluded from an employee’s hourly pay rate for overtime calculations under specific conditions related to the nature of the suggestion.
  1. Noncash Prizes:
  • The fair market value of noncash prizes is included in wages subject to various taxes.
  1. Nontaxable Gifts:
  • Infrequent gifts such as turkeys, fruit baskets, hams, wine, flowers, and tickets to events are considered de minimis (nontaxable) fringes.
  1. Taxable Gifts:
  • Cash or cash equivalents, including gift certificates, for any amount are considered wages subject to taxes.
  1. Parties and Picnics:
  • The cost of parties and picnics is 100% deductible to the business and nontaxable to employees if infrequent and aimed at promoting employee well-being, goodwill, contentment, or efficiency.