Are points awarded to members taxable?

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It depends on a number of factors, like the relationship between the group and its member(s), the reason for which points are given, and the amount in question.

Any amount transferred from an employer to a worker (regardless of employment classification) is assumed to be taxable compensation and excludible only if they meet certain qualifications.

The amount transferred will not be taxed if it can be shown it’s not in recognition of the recipient’s employment. Therefore, members of an association or group that are provided some amount for some reason not related to an employment relationship is not taxable. Further, The amounts are not taxable if there is a familial relationship between parties or made for the reasons of affection, respect, and admiration. Workers who receive awards as gifts, appreciation, loyalty, or simple recognition are not taxed. Workers who receive awards directly related to compensation or work efforts will have those amounts taxed.

Amounts that fall under scholarship or fellowship grants are not taxed. Amounts to workers for length of service or safety achievements, work anniversaries, or birthdays not taxed. Amounts in recognition for charitable, scientific, artistic, and similar achievements are excluded if certain criteria are met and the winner assigns the prize or award to a charitable or religious organization. So those amounts donated to a charitable organization are not taxed.

Membership inclusion costs, discounts or trivial amounts for working conditions or qualified transportation costs are not taxed. If a company adds a member as premium (value = $5/mo) this would not be taxed. It is an inclusion cost and also trivial.

Amounts that are deemed qualified taxable are included in gross income at the time prize points are paid or made available. Withholding rules still apply, but employers can do it on their regular pay period basis to make it easier on them.

Please visit In-Depth Review Of Important Tax Matters for an detailed look at how the IRS qualifies taxable vs. non taxable fringe benefits, gifts vs. income, valuation, timing, and withholding criteria.