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I won a non-cash prize as part of my company's wellness competition. The nominal value is maybe $300-$400 (T-shirts, misc sports clothing).

Now they told me after the fact that this is taxable income, and that they won't cover the tax. They may not have been aware of the tax issue. I am sure the prize was given in good faith, but the items are still not worth the $150 tax to me.

I assume, due to the amount, that it is not a de minimis fringe benefit, and that it is not an achievement award, as these can only be given for length of service or safety achievements.

Is there any other way out of this situation, other than returning the clothing?

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Did/will your company report this income to the IRS? – dg99 May 25 '14 at 19:57
They told me they will have to, unfortunately weeks after I got the stuff. I think they completely overlooked the tax implications, told me it would be a "gift", which doesn't make sense, as a company can't make a gift to an employee. As littleadv said, it is more like a bonus. It is a bit of an unfortunate situation, some admin made an honest mistake and I don't want to get anyone in trouble. I would not be surprised if they report it the wrong way and cause me even more of a hassle. This is the first time they have this wellness program. – user15162 May 26 '14 at 2:51
up vote 3 down vote accepted

No, there's not. You've got a bonus, and the IRS/FTB don't really care that you didn't get it in cash. They still want their share.

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