The IRS is seeking to lay to rest any doubts about the taxability of certain rewards extended to employees who participate in wellness programs. In a recent memorandum (number 201622031), Stephen Tackney, the IRS Deputy Associate Chief Counsel, responded to a question involving three distinct wellness incentive scenarios. In each case, the incentives were deemed subject to income tax.

In the first scenario, employees are eligible to participate in a wellness program without charge, regardless of whether they also participate in the employer’s health plan. Because the wellness program features health screening “and other health benefits,” it qualifies as a health plan under the Internal Revenue Code’s (IRC) section 106.

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