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Prizes and Awards Policy

Employee
The general rule on prizes and awards is to include such amounts received, whether in the form of cash or the fair market value of noncash prizes and awards, in gross income. There are exceptions to the general rule for prizes and awards transferred to charities, certain employee achievement awards, qualified scholarships, and "de minimis amounts."

You should not include in income amounts received as prizes and awards made primarily in recognition of religious, charitable, scientific, educational, artistic, literary, or civic achievement, but only if the recipient was selected without any action on his part to enter the contest or proceeding; the recipient is not required to render substantial future service as a condition to receiving the prize or award, and the prize or award is transferred by the payer to a governmental unit or organization described in Section 170(c) pursuant to a designation made by the recipient. A 170(c) organization is an organization organized for charitable, educational, or other tax-exempt purpose, etc.

Prizes awarded employees must be made in accordance with the guidelines established by the N.C. Office of State Personnel. State Personnel's guidelines state that the prize or award must be "de minimis" in value ($25 or less). A "de minimis" prize or award should not be included in the employee's annual income. However, Employee Suggestion Award Program awards in excess of $25 should be included in the employee's annual income on a form W-2.

Non-Employee
Prizes and awards paid to non-employees in excess of $600 for the calendar year are reported on a 1099-MISC Form.

Rewards and fees paid to individuals, who provide information concerning criminal activity, are not reportable when paid by a governmental entity.