IRS Tax on Employee Reward changes under the Tax Cuts and Jobs Act


There are new rules for the IRS tax on employee rewards. The IRS reminds employers that last year’s Tax Cuts and Jobs Act (TCJA) made changes to several programs that can affect an employer’s bottom line and its employees’ deductions. This includes employee achievement awards.

Here are some facts about these changes:

Under previous law:

  • Employers could deduct the cost of certain employee achievement awards. Deductible awards were excludible from employee income.

Under the TCJA:

  • There is now a prohibition on cash, gift cards, and other non-tangible personal property as employee achievement awards.
  • Special rules allow an employee to exclude certain achievement awards from their wages if the awards are tangible personal property.
  • The new law clarifies that tangible personal property does not include cash, cash equivalents, gift cards, gift coupons, certain gift certificates, tickets to theater or sporting events, vacations, meals, lodging, stocks, bonds, securities, and other similar items.

For more information about this article, please contact our tax professionals at taxalerts@windes.com or toll free at (844) 252-7337.

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