The Tax E Man Blog, along with our website http://www.PatTax.net are designed to be year round resources for tax consultation, preparation, and representation services provided by Pat Tax Inc., Please feel free to contact us with any questions or concerns.

Pat can be contacted at 347 949-8293 or email: PatTaxHelp@gmail.com with any questions or concerns.

 

 

Tax Treatment of Fringe Benefits

The term “fringe benefit” refers to any benefit provided to an employee that is in addition to money. All benefits provided to an employee are taxable unless the law specifically excludes or defers tax on the benefit. Thus, a fringe benefit can either be taxable, tax-deferred, or excluded from taxation.

 
The personal use of an employer-provided vehicle is an example of a taxable fringe benefit. An employer contribution to a qualified retirement plan on behalf of the
employee is an example of a tax-deferred fringe benefit. Employer-provided health insurance for an employee is an example of a tax-free fringe benefit.

 

 

Business Owner

A small business owner in a corporate setting may be both the owner and an employee of his or her business. By taking advantage of excludable fringe benefits, the owner receives a double benefit. First, the cost of the benefit is deductible by the business. Second, the cost
of the benefit is tax free to the employee-owner.

 

 

Read 2016 Fringe Benefits Here

 

 

Nondiscrimination Rules for Fringe Benefits

Nondiscrimination rules are designed to prevent business owners from offering tax-favored fringe benefits to themselves but not their employees. In general,
if fringe benefits are offered to all employees, then all employees, including the top paid employees, receive tax-favored treatment on employee benefits. However, if a plan favors highly-compensated employees or key employees, the value of the benefit must be included in their taxable wages. The terms highly-compensated employees and key employees can mean different things depending on the applicable plan. Special restrictions apply for fringe benefits for sole proprietors, partners, certain LLC members, and S corporation shareholders.Consult your tax advisor if you are a business owner
considering providing fringe benefits to yourself and your employees.

 

 

Employer-Provided Vehicles

 

If an employer provides an employee with a company owned vehicle, and the employee uses the vehicle for personal purposes, the value of that personal use must be included as taxable income on the employee’s Form W-2. Under the general rule, the taxable amount equals the fair market value of the total use, minus the amount the employee pays for the use.

 

 

Employer-Provided Cell Phones

The value of an employer-provided cell phone, provided primarily for non-compensatory business reasons, is excludable from an employee’s income.

Non-compensatory Business Purposes

An employer needs substantial business reasons for providing the cell phone. Examples include:

•  Need to contact the employee at all times for work-related emergencies,
• Requirement that the employee be available to speak with clients at times when the employee is away from the office, and
• Need to speak with clients located in other time zones at times outside the employee’s normal workday.

 

Read 2016 Fringe Benefits Here

 

 

Any accounting business or tax advice contained in the Tax E Man Blog or http://www.PatTax.net, including attachments, links and enclosures, are not intended as a thorough, in-depth analysis of specific issues, nor a substitute for a formal opinion, nor is it sufficient to avoid tax related penalties.

If desired, Pat Tax Inc. would be please to perform the requisite research and provide you with a detailed written analysis. Such an engagement may be the subject of a separate engagement letter that would define the scope and limits of the desired.

The Tax E Man Blog, along with our website http://www.PatTax.net are designed to be year round resources for tax consultation, preparation, and representation services provided by Pat Tax Inc., Please feel free to contact us with any questions or concerns.

Pat can be contacted at 347 949-8293 or email: PatTaxHelp@gmail.com with any questions or concerns.