HR Support on Fringe Benefits

Editor's Note: Keep up with regulations on fringe benefits and other payments!

Rena PirsosOverview: Fringe benefits, such as health benefits, company cars, commuter transportation benefits and educational assistance plans, just to name a few, are the icing on the cake in attracting and retaining high quality employees. In this heavily regulated area, however, employers must stay abreast of frequent payroll tax law changes to prevent an otherwise tax-free fringe benefit from becoming fully taxable. Employers must also look out for changes to the special payroll tax rules that apply to other common types of payments such bonuses, severance pay and back pay.

Trends:

  • Standard mileage rates: The optional standard mileage rates used to calculate the deductible cost of operating a vehicle for business, charitable, and medical or moving purposes and the company fleet maximum valuation amounts have changed for 2014.
  • Qualified transportation fringe benefits: The amounts that may be excluded from an employee's gross income for employer-provided qualified transportation fringe benefits for 2014 have changed from the 2013 amounts. In addition, the parity for mass transit benefits, which was extended by the American Taxpayer Relief Act of 2012, expired at the end of 2013.
  • FICA taxation of severance pay: The US Supreme Court unanimously ruled in United States v. Quality Stores, Inc., No. 12-1408 (U.S. Sup. Ct., 3-25-14), that severance payments made to involuntarily terminated employees that do not qualify as supplemental unemployment benefits under the Internal Revenue Code are subject to Social Security and Medicare (FICA) taxes. The decision overturned a lower court ruling that could have required the Internal Revenue Service to issue more than $1 billion in refunds.
  • Proposed IRS regulations that employers may rely on until finalized: Employees who are not away from home overnight may now be reimbursed for their local lodging expenses as a working condition fringe benefit; the IRS has clarified the definition of a reimbursement or other employee expense allowance arrangement; the IRS has explained the substantial risk of forfeiture conditions for stock transfers made on or after January 1, 2013.

Author: Rena Pirsos, JD, Legal Editor

Latest items in Fringe Benefits

  • 2015 Fringe Benefit and Pension Plan COLAs Released: Employment Law Manual, Quick Reference Chart Updated

    Date:
    04 December 2014
    Type:
    Editor's Choice

    The IRS has issued the annual pension and fringe benefit plan cost-of-living adjustments (COLAs) for tax-year 2015. Employers must reprogram their computers and payroll systems with these amounts before the first payroll of 2015.

  • IRS Updates Guidance on Taxation of Electronically-Provided Qualified Transportation Fringe Benefits

    Date:
    26 November 2014
    Type:
    News

    The IRS has issued Revenue Ruling 2014-32 (Rev. Rul.) providing guidance on the tax consequences of employer use of smartcards, debit or credit cards, or other electronic media to provide qualified transportation fringe benefits to employees. The Rev. Rul. also discusses whether mandatory delivery charges employees incur when ordering vanpool vouchers are qualified transportation fringe benefits.

  • Taxation of Employee Benefits

    Type:
    Employment Law Manual

    Employee benefits, such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans, may be subject to withholding for federal income taxes (FIT), Social Security and Medicare (FICA) taxes or federal unemployment (FUTA) taxes. This section assists HR professionals in understanding how each particular type of benefit plan must be structured and how to properly tax and report contributions, reimbursements and distributions in order to ensure compliance with the Internal Revenue Code.

  • Local Lodging Expense Regulations Finalized by IRS

    Date:
    20 November 2014
    Type:
    News

    The IRS has adopted as final regulations that clarify proposed regulations issued in 2012 allowing employers to reimburse employees who are not away from home overnight for their local lodging expenses as a tax-free working condition fringe benefit (rather than a taxable personal expense) under the Internal Revenue Code.

  • Annual Retirement Plan COLAs and Fringe Benefit Limitations

    Type:
    Quick Reference

    This chart provides employers with a comparison of the current and prior year retirement plan cost of living adjustments and fringe benefit limitations. It helps employers ensure that they are withholding the correct amount of taxes from the pay of employees who receive various benefits. The chart will be updated annually when new amounts are announced by the Internal Revenue Service, which is usually by the end of October.

  • IRS Announces 2015 Inflation Adjustments to Fringe Benefits, Other Taxable Amounts

    Date:
    31 October 2014
    Type:
    News

    The IRS has announced the annual cost-of-living adjustments made to several employee benefits and taxable amounts, based on changes to the Consumer Price Index. These are the maximum amounts that may be excluded in 2015 from an employee's taxable income for specific benefits.

  • Educational Assistance Programs Handbook Statement

    Type:
    Employee Handbooks

    Employers seeking to advise employees that they will offer educational assistance as a benefit and encourage employees to continue professional development through advanced training and education should consider including this model policy statement in their handbook.

  • Taxation of Employee Benefits: Wisconsin

    Type:
    Employment Law Manual

    An in-depth review of the spectrum of Wisconsin employment law requirements HR must follow in respect to Taxation of Employee Benefits.

  • Aircraft Terminal Charge, SIFL Mileage Rates Increase for Second Half of 2014

    Date:
    08 September 2014
    Type:
    News

    The US Department of Transportation has released the aircraft terminal charge and standard industry fare level (SIFL) mileage rates for the second half of 2014. The rates are used by the Internal Revenue Service to determine the value of noncommercial flights on employer-provided aircraft under the aircraft valuation method for withholding tax purposes.

  • Los Angeles-Area Employers Must Reimburse Employees for Work-Related Calls on Personal Cell Phones

    Date:
    25 August 2014
    Type:
    News

    The ruling in Cochran v. Schwan's Home Service, Inc. sheds light on important issues for employers with respect to BYOD (Bring Your Own Device), the practice of allowing employees to use their own personal devices such as cell phones and tablets for work-related purposes.