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George Delta: Incentive Program Legal Compliance
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Hi, this is George Delta with the Incentive Federation
Part of structuring a good rewards and recognition and incentive program is complying with the legal requirements.
For example, if your program is safety or length of service awards, it’s important that you comply with Section 274J of the code. That means that the average value of the award per recipient should be no more than $400 and that the award be in the form of tangible personal property, which means merchandise.
Secondly, if you are running a different type of incentive rewards and recognition program you should understand that the program will be taxable to the recipient. If the recipient is an employee, the value of the award will be added to the employees W2, and if the recipient is an independent contractor and the total value of the award given to the recipient is $600 or more, they have to be reported on his or her 1099.
So, it is important to comply with the legal requirements when you structure any kind of incentive rewards and recognition program, whether it is taxable or non-taxable under section 274J.