Procedure: 101-Payments to Individuals
Prizes and Awards
Cash prizes and awards which are in any way related to a person's employment with the University MUST be paid through the payroll system as a lump sum payment. An example of this type of payment is an award to a faculty member for excellence in teaching. The payment will be subject to tax and social security withholding and will be reported on the employe's W2 form.
Occasionally, persons who are considered University employes receive prizes and awards that are completely unrelated to their employment. For example, a student who happens to work on campus may win an essay contest sponsored by an academic department. This type of payment should be requested on the Payment to Individual Report.
It is important to note that some persons who are paid regularly through the payroll system are not considered University employes. Prizes and awards related to these persons' University appointments should be made on the PIR because no employment relationship exists. These titles include Post Doc Fellow, Post Doc Trainee, Fellow, Scholar, Trainee, Advanced Opportunity Fellow, and Research Assistant.
Cash prizes and awards are considered taxable income and are reported to federal and state tax authorities. In contrast, scholarships and fellowships are taxable only to the extent they exceed tuition, books, and course-related supplies and equipment. Scholarships and fellowships to U.S. residents are not reported to federal and state tax authorities. It is very important that scholarships and fellowships be reported on the appropriate scholarship/fellowship class code. Scholarships and fellowships recorded on a prizes/awards class code will receive incorrect tax treatment. If you are unsure if a payment qualifies as an award or a scholarship, the determining factor should be whether the student has unrestricted access to the funds. It is most likely a scholarship if the recipient must be currently registered or registered in the future at an educational institution in order to receive the payment. It is most likely an award if the recipient is entitled to receive payment regardless of student status.
Procedure: 101-Payments to Individuals
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