Are monetary awards, given under an employee recognition program, subject to payroll taxes?
Yes, any cash award is taxable to the employee as a wage and is subject to payroll taxes and withholding. Cash equivalents, such as savings bonds and gift certificates are also taxable. See the first paragraph on the top of page 79, the last paragraph on page 80, and the first bullet at the top of page 85 in the Internal Revenue Service publication, Taxable Fringe Benefit Guide, January 2009. Also, note the remainder of the discussion on pages 79-86. The fair market value of non-cash awards and prizes may also be taxable.
