IRS Fringe Benefits Guide Flashcards
The Internal Revenue Service (IRS) created this publication to help government entities determine the correct tax treatment of employee fringe benefits, including using the appropriate withholding and reporting procedures.
What is a fringe benefit?
A fringe benefit is a form of pay for the performance of services, including property, services, cash, or cash equivalent, in addition to stated pay.
Are fringe benefits taxable?
Fringe benefits are taxable wages unless specifically excluded by a section of the Internal Revenue Code.
What does the term ‘fringe benefit’ broadly refer to?
The term ‘fringe benefit’ broadly refers to all remuneration other than stated pay for which special tax treatment is available.
What are the types of tax treatment for fringe benefits?
Fringe benefits can be taxable, nontaxable (excludable), partially taxable, or tax-deferred.
How is the taxable amount of a fringe benefit determined?
The taxable amount of a fringe benefit is determined by its fair market value (FMV) and is reduced by any amount paid by or for the employee.
What are some IRC sections that exclude fringe benefits?
Some IRC sections that exclude fringe benefits include Sections 105, 106, 117(d), 119, 125, 127, 129, 132(b) to 132(n), and 137.
What constitutes a nontaxable working condition fringe benefit?
A nontaxable working condition fringe benefit includes property or services that would be deductible as a business expense if the employee paid for them.
What are examples of excludable de minimis fringe benefits?
Examples include occasional coffee, doughnuts, soft drinks, flowers, local telephone calls, and traditional birthday or holiday gifts with a low FMV.
Under what conditions can meal money be excluded as a de minimis fringe benefit?
Meal money can be excluded if it is occasional, provided for overtime work, and enables overtime work.
What is a no-additional-cost service?
A no-additional-cost service is a service offered to customers in the employer’s line of business and provided to the employee without incurring any substantial additional cost.
What conditions must be met for an employee discount to be excludable?
The discount must not exceed the employer’s gross profit percentage for merchandise or 20% of the price for services, and must be offered to customers in the ordinary course of business.
What are qualified transportation fringe benefits?
Qualified transportation fringe benefits include commuter transportation in a commuter highway vehicle, transit passes, qualified parking, and qualified bicycle commuting reimbursements.
What is the maximum excludable amount for health and medical benefits?
Employer contributions to health plans are excludable from the income of employees, without a specified maximum in the provided text.
How are travel expenses treated for tax purposes?
Reimbursements for allowable business travel expenses are excludable if the travel is temporary and requires an overnight stay or substantial sleep or rest.
What constitutes transportation expenses?
Transportation expenses are costs for local business travel not involving overnight stays, such as air, train, bus fares, mileage, tolls, and parking fees, in the area of the tax home.
