When you're looking for ways to let your corporation work for you, awards can be a useful way to reward shareholder-employees and employees. Your corporation can take a deduction by making awards to employees going above and beyond. (And in some cases the awards can even be tax-free to the employee.) For example, in a small corporation where husband and wife share corporate duties, the founder might receive an award for being the employee there the longest, while the other spouse might receive an award for creating a safe working environment at the corporate location. Know that the IRS requires that there be a written qualified award plan for this to work.
But done right, such awards are considered fringe benefits by the IRS. While some awards will be taxable and included as income for the employee others may be excluded from any taxes. Cash, its equivalent, gift certificates and other intangibles such as vacations, meals, lodging, stocks, bonds and other securities are always taxable. But tangible property (think golf clubs and TVs) may be excluded from taxation.