Taxation of Employee Benefits Flashcards
What’s the general rule re: benefits received by an employee?
Included in gross income.
Is reimbursement of employee business expense included in income of the employee? Exception?
Yes (the employee might get deduction to offset the income).
Reimbursement under an accountable plan are not required to be reported on the W-2.
When employee benefits are generally excluded from income?
When the benefits plans do not discriminate in favor of highly compensated employees (apply to everyone).
What happens when benefits do discriminate?
Highly compensated employees must include it in income, but in general other employees don’t.
Life insurance (group-term policy - can’t discriminate): whats the tax treatment for employees when the employer pays the premiums?
up to $50,000 can be excluded from income.
Amount over $50,000 is taxed based on IRS rate based on the TP’s age.
What’s the difference between term insurance and whole-life insurance?
Whole: builds cash value.
Term: it doesn’t.
A whole-life insurance: Tax treatment when an employer pays premiums?
The value of premiums are included in income.
Health insurance premiums paid by employer: Tax treatment?
Excluded.
Long-term care policies paid by employer: Tax treatment?
Excluded.
Wage continuation insurance paid by employer: Tax treatment?
Included.
Disability insurance: Tax treatment for premiums paid by TP?
Not deductible.
Disability insurance: Tax treatment for premiums paid by an employer?
For employer: deductible.
For employee: excluded from income.
Disability insurance: Tax treatment for benefits received when premiums were paid by TP?
Excluded from income.
Disability insurance: Tax treatment for benefits received when premiums were paid by employer?
Included in income.
What are 3 criteria for meals to be excluded?
- Furnished for convenience of employer.
- On employer’s premise.
- Meals must be in-kind.
When can lodging provided by employer be excluded? At what value?
If it was a condition of employment.
FMV.
Tax treatment for no-additional cost services (let employees use extra seatings on airplanes)?
Excluded.
Tax treatment for employee discounts? Limits?
Excluded.
Limited to gross profit percentage (cost) or 20% for services.
Tax treatment for working condition fringe (ex: subscription to tax journal)?
Excluded.
Tax treatment for de minimis fringes (ex: use of copy/fax machines, free coffee)?
Excluded because it is minimum.
Tax treatment for nominal gifts (up to $25)?
Excluded.
Tax treatment for pmts for transportation and parking ?
Excluded. ($255 per month in 2017) ($255 per month in 2017)
Tax treatment for employer-provided retirement planning advice?
Excluded.
Tax treatment for pmts from employer for expenses that would be deductible as moving expense?
Excluded.
