Employer-provided fringe benefits can be an important part of an overall compensation package. Highly valued by employees, benefits are even more prized when they fall under an exception from being taxed. Below is a generalized, non-inclusive listing of some of the most commonly provided tax-free benefits. In most cases, they are not subject to social security or FUTA tax as well.
• Accident or health insurance premiums, including contributions to health savings accounts (HSAs)
• Achievement awards—property given for length of service or safety achievement
• Personal use of a company-provided cell phone provided primarily for business use
• Holiday gifts (non-cash) with a nominal fair market value
• Occasional parties or picnics for employees
• Coffee, doughnuts, or soft drinks provided on the employer’s premises
• Occasional meals or meal money provided to enable the employee to work overtime
• Group term-life insurance (limited)
• Educational assistance up to $ 5,250 under a formal written plan
• Reimbursement of deductible moving expenses
• Employee discounts on property or services you offer to your customers
• Qualified transportation benefits, including transit passes or qualified parking
• Reimbursed job-related expenses incurred by an employee under an accountable plan
• Contributions to qualified retirement plans
• Advice concerning the above retirement plan, and retirement planning in general
Note that cash and cash-equivalent fringe benefits (such as gift cards, prepaid cards, etc), no matter how small, are never excludable. They must always be included in the employee’s payroll amounts.
Many of the above items are tax-exempt only if paid under a formal, written plan which does not discriminate. Also, benefits are often limited for company owners, partners, and highly compensated employees.
If any of the above might be a useful addition to your company’s compensation package, be sure to contact your WVCO tax pro for details in implementing the benefit.
By: George Monger, Senior Manager