Prizes and Awards

Gift Certificates

Question:

My questions relates to tax liability on gift certificates. I work as manager of Accounts Payable for a University. Our student organization has given out several gift certificates for Bowling and/or Billiard Party at the University Student Union Games Center. The value of the gift certificates is $200. The Games Center is donating the bowling lane fees and bowling balls and shoe fees for up to 18 people. There is no cost to the University for this part of the gift. In addition, the gift certificate covers the cost of Pizza that is served by our University Food Service. The cost of Pizza is $75. Question: Should we track this for 1099 reporting? Is there a tax liability to the recipient of the gift certificate? Is the tax liability just on the amount of the Pizza (cost to the University), or is it the total value of the gift certificate? Thank you for your help.

Answer:

Quite a few things come int . . .

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I understand that prizes to employees are reportable on IRS Form W-2 . . . .

Question:

I understand that prizes to employees are reportable on IRS Form W-2 as wages. I just want to clarify the following issue. If an employer sponsors an event and gives attendance prizes, will an attendance prize won an employee be reportable on the W-2 rather than the 1099 even if the event and employee's attendance of the event have nothing to do with the employee's job duties. Thanks you for your assistance.

Answer:

 
Whether a priz . . .

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We have a program running all year that if you . . .

Question:

We have a program running all year that if you sell our vacuumes you will be giving money for selling that machine. We have an outside service that collects the amount of vacuumes sold and then funds a credit card for that amount. Then in turn they tell us how much they have funded on these cards and we wire the funds to them. We have a gentleman who insists that we are reporting in the incorrect box.

Answer:

Prizes based on services pr . . .

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We need advice on the best way to distribute gifts/awards . . .

Question:

We need advice on the best way to distribute gifts/awards for a contest we are going to have amongst our insurance agencies. The agency that produces the most in a given amount of time will win. The prizes (weekend getaway trips) will be given to the individual employees of the agency and not the agency as a whole. We have several ideas we are kicking around about how to pay out these gift/awards. 1) make a deposit with a local travel agency, winners would make their arrangements directly with the travel agency who would then bill us any amounts above our deposit. 2) Give out gift certificates for the travel agency. 3) Issues checks directly to the winners.

So am I correct in that we would be required to issue 1099's (if the $ is above $600 of course) to the recipients of the gift/awards? But also would the way we distribute the gift/award determine who we would have to issue the 1099 to? The winner or the travel agency (if we paid them direct) or would they just be a third party that we pay on behalf of gift/award winner? I would appreciate any direction on this as I want to ensure that we handle it properly to avoid issues down the road.

Answer:

The amount (fair market val . . .

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can you please list couple of examples of substantial limitation . . .

Question:

can you please list couple of examples of substantial limitation when it is appropriate not to report 1099MIS to winners?

Answer:

Within code section 1.6041- . . .

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