Tax time’s coming – is your recognition program ready?
Unless you’re an accountant, you’re not going to love this article.
But you’re definitely going to need it.
We're talking about recognition and taxes – a potential minefield of perspectives, insights and approaches. And while your legal and accounting team should be doing the heavy lifting when it comes to navigating the tax codes of your country, state, province of prefecture, it does help to educate yourself on the basics of the topic.
When you’re tax planning for the year ahead in your organization’s recognition program(s), you want to ask some critical questions:
Are you familiar with 274J?
If you’re in the United States, this section of tax code is an ideal place to start. If you’re in other countries, check your local tax code for more information.
Do you know the difference between taxation for different types of recognition?
Performance rewards, service rewards, health and safety rewards – the taxman may see these a little differently in terms of how you tax, gross up or manage.
Are you (currently) compliant?
This is the single biggest question you’ll ask. Tax codes shift year to year, administration to administration. Perform a compliance review – particularly if your program offers rewards that are branded with your organization’s logo.
Are you managing the experience for your employees?
There’s nothing worse than being presented a shiny new tablet for your great work – then getting socked with a tax bill for nearly half the value of the item. Create a process for the entire transaction that includes grossing up the product, then paying appropriate taxes on the value of the product...
Do your recipients understand what’s going on?
...and then communicating what’s happening to those who are receiving rewards. Grossing up and paying potential taxes appears on pay stubs. Create boilerplate communications to send to employees, so they’re clear about what’s happening. Otherwise, expect a confused phone call during the next pay period.
Want to learn more about taxation and your program? There’s some great information at http://www.incentivefederation.org.