What does fringe benefit mean? What qualifies as a fringe benefit? Are these benefits taxed? These are all important questions. First, let’s just look at the official IRS definition of a fringe benefit:
A form of pay for the performance of services.
Or, more simply put, it’s all the extra stuff employers give to people who work for them other than salaries or wages. Employers can give fringe benefits to employees, partners, contractors, and other third parties. Here are some common fringe benefits:
- Accident and health care
- Adoption assistance
- Dependent care
- Educational assistance
- Life insurance
- Moving expenses
- Company transportation
- Retirement plans
Plus, the benefit does not have to be direct. How so? Here are some examples:
- As an employer you have a client who offers their day care services to your employees’ children. Therefore, you are providing your employees a benefit and in turn those employees perform a service for you.
- An employer has an employee whose spouse needs dependent care. The benefit is not directly given from employer to employee but rather the employee’s family member.
Now that we understand what qualifies as a fringe benefit, who they come from and who they are distributed to, we can look at what is taxable. Most fringe benefits are taxable to a certain degree, but there are some exceptions. Take a look at the table below:
Awards, prizes, bonuses, commissions, personal use of company care, gift cards
|Partially taxable (up to certain amounts)||Accident benefits, health benefits, certain achievement awards, adoption aid, athletic facilities, dependent care, education, employee discounts, stock options, employer-provided cell phones, group term life insurance, HSAs, lodging, meals, moving expenses, transportation or commuting expenses, undergrad tuition reduction|
|Exempt from employment taxes||De minimus benefits, no additional-cost services, retirement planning services, working condition benefits|
|De minimus (benefits too small for recording)||Occasional items like coffee, doughnuts, soft drinks, overtime work meals, parties, picnics, copier use, tickets to sporting/entertainment events; small holiday gifts, $2,000 group term life insurance|
There are several details associated with what is taxable, and how much is considered taxable. For the purpose of compliance and year-end taxes, you will want to visit the IRS website here for further, more thorough information. BenefitMall is well equipped to help you better understand fringe benefits with online payroll software making payroll reporting easy and accurate. With our simple online interface, it makes running payoll and reports practically effortless, while maintaining the mandatory tax compliance needed for any small business.
If you have any questions and need to speak with a professional, you can always contact us for employee and income reporting, payroll streamlining and payroll tax compliance.
Learn more about our online payroll solution today.