FIACCT 05-03_06 Employee reimbursements – incentive awards & bonuses

Effective: July 1, 1994
Revised: January 25, 2023
Reviewed: January 25, 2023

Purpose

This policy explains the method for state agencies to use to issue incentive awards to their employees.

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Policy

A. Agencies may issue incentive awards and bonuses to their employees in accordance with the State of Utah Personnel Management Rules issued by the Department of Human Resource Management.

B. Cash incentive awards are considered taxable income to the employee. The Payroll System automatically withholds the federal income, Social Security, and state income taxes from the payroll warrant.

C. Cash incentive awards are approved and entered using Wage Type 1139 on the Time Entry Screen in the Time Management System by the originating agencies or divisions.

D. Cash Equivalents such as gift certificates, movie passes, admission tickets, savings bonds, state warrants (regardless of whom they are payable to), etc. may be given as incentive awards (See FIACCT 05-15.00 Section II.A. for prohibitions on purchasing cash equivalents with a P-Card). However, since cash equivalent incentive awards are taxable, the value of the cash equivalent award must be recorded in the Payroll System using wage type 1128. The amount entered as wage type 1128 will be added to the employee’s year-to-date taxable gross on the payroll cycle it is entered without increasing their current net pay. The Payroll System will recognize the employee’s year-to-date taxable gross was increased and will withhold additional taxes from their current pay to adjust for this additional taxable amount entered. Therefore, an additional amount equal to 30% of the cash equivalent award may be added to help offset the additional taxes due from our employee. To include this additional amount, you must calculate what 30% of the cash equivalent award is and enter that amount as wage type 1139. The cash equivalent award (wage type 1128) and the extra 30% (wage type 1139) amounts will both be included as taxable income on the employee’s W-2.

E. Non-cash incentive awards such as apparel and consumables are considered non-taxable to the employee and the purchase of the non-cash items may be entered in the FINET system as a GAX or
PRC, or they may be purchased on a state issued P-Card. Individual awards shall not exceed a value of
$99 per occurrence and a cumulative annual value of $396 each fiscal year. Note: In order to be non-
taxable to the employee, the item needs to be considered de minimis by the IRS. These thresholds are
based on a tax attorney opinion to help ensure they are within IRS guidelines.

F. Object code 5155 should be used for all payments for purchases of cash equivalent incentive awards.

G. Object code 6270 should be used for all payments for purchases of non-cash incentive awards.

H. Supporting documentation must be kept at the originating agency, and is subject to audit.