Donations of Honoraria, Prizes and Other Payments
The Internal Revenue Service requires that all payments for
honoraria, prizes and certain other payments be included as income
to the individual.
Examples are, but not limited to:
Honoraria and Prizes
Payment of honoraria and/or expenses to Foreign Nationals are required to be reported, with mandatory tax withholding. The individual conducting the activity is the beneficial owner of the payment. Tax withholding may be exempted by applicable tax treaty articles, providing the individual claims the exemption by completing the necessary forms in the Finance Office.
Assignment of Compensation
In situations where an employee has the option to either receive compensation in cash or have the funds directed to a research account, expense account or other, the employee is deemed in "constructive receipt" of the funds. The total amount of the funds are therefore taxable compensation must be included in the employee's wages for the appropriate tax withholding, irrespective of the employee's choice of disposition of the funds.
Donation of Services
Employees cannot donate compensation for services. The amount must be included as compensation and taxed accordingly. The employee may then donate the funds and take a charitable deduction on their annual tax filing.
Non-Employees may donate their honoraria or compensation to Wesleyan. However, they cannot direct the donation to a specific department or purpose, as this would effectively be "constructive receipt" of the funds, and therefore be taxable to the individual. Wesleyan cannot honor requests for payments directly to a University, College or other non-profit organization, since these payments are considered reportable to the IRS on a form 1099-misc., as potentially taxable compensation.
Payments in cash or cash equivalent (e.g. gift cards or gift certificates), are not considered to be "de minimus" (as defined by the IRS), and therefore constitute salary and wages.
Fringe benefits and non-monetary awards with a Fair Market Value of $100 or more, are not considered "de minimus", and therefore constitute salary and wages.