Taxable Fringe Benefits

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Taxable Fringe Benefits

Taxable Fringe Benefits are included on the Form W-2 as taxable benefits, making them subject to Federal Income Tax, Social Security, Medicare, FUTA, and possibly some State Income and Unemployment Taxes. The Internal Revenue Service (IRS) has issued regulagulations defining what is considered a Taxable Fringe Benefit and how to arrive at its value. The taxing on these benefits varies by each company’s interpretation of the law. If you require advice on this, please contact your Accountant, or Legal or Tax Advisors.

Fringe Benefits MUST be submitted with other paid wages to allow for accurate tax deductions. If your employee has insufficient pay from which to withhold the taxes, you will be potentially liable for paying the employee’s taxes. Verify that withholding has been made properly throughout the year, or you MUST withhold from the final paycheck for taxable fringe benefits. These may include:

  • Group-term life insurance in excess of $50,000
  • Third-party sick pay (is the third party issuing a Form W-2?)
  • Personal use of company vehicle
  • Non-qualified moving expense reimbursements
  • Company-provided transportation or parking
  • Employer-paid education not related to the employee’s job
  • Non-accountable business expense reimbursements or allowances
  • Bonuses
  • Non-cash payments (i.e. – gift cards)

Check for required backup withholding; verify amounts If fringe benefits for an employee are reported after their final wages for the tax year have been processed, the employer will pay the taxes for the taxable benefit amount. *Fringe Benefits affect Form W-2 boxes 1, 3, 5.

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