Can we give an employee a catalog selection instead of cash and treat it as a tax-free achievement award?
A catalog selection can qualify for employee achievement-award treatment only if the award meets the applicable tangible-personal-property,…
By AE Tax Advisors Team · Updated October 28, 2026
A catalog selection can qualify for employee achievement-award treatment only if the award meets the applicable tangible-personal-property, length-of-service or safety and other requirements. A generic cash-equivalent gift card does not become excludable merely because the employee spends it on property. Deduction and exclusion limits also apply.
A specific business-owner situation
An employer offers a restricted catalog of selected tangible items for a service anniversary. That differs from giving a general-purpose online shopping credit with unrestricted purchasing power.
Illustrative example, not a client result.
What to establish before filing
- Identify the award purpose and plan.
- Review the selection rights and excluded items.
- Apply the relevant dollar and qualification limits.
Which fact changes the answer?
A qualifying restricted arrangement to select tangible property differs from a general cash-equivalent card. The employee's actual redemption rights matter.
A mistake to avoid
Do not call a performance bonus a length-of-service award after it is paid.
Records that support the decision
- Award plan.
- Catalog terms.
- Employee eligibility and award cost.
The decision to document
Confirm the award structure before ordering and route any taxable portion through payroll.
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Related questions
- An insurer paid our employee disability benefits. Who reports the sick pay on Form W-2?
- An employee died before we paid earned wages. Do we report the payment like normal payroll?
Sources and editorial context
- IRS Publication 15: employer tax guide
- IRS Publication 15-A: supplemental payroll rules
- IRS Publication 15-B: employee fringe benefits
General educational information prepared with AI assistance. No individual professional review is claimed. Apply the relevant tax-year rules to the actual records. Editorial policy · AI disclosure.