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 has agreed to hear the appeal of the Sixth Circuit Court of Appeals ruling in U.S. v Quality Stores, Inc., No 12-1408 (U.S. Sup. Ct., 10-1-13) that severance payments to employees who involuntarily lost their jobs are supplemental unemployment benefits (SUB), which are not subject to Social Security and Medicare (FICA) taxes. Because severance payments are currently treated as FICA taxable wages, a ruling by the Court that severance pay is not taxable would result in millions in savings for the employer community. The Court heard oral arguments in the case on January 14, 2014.
  • 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

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    Type:
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    Type:
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    Type:
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    Type:
    Employment Law Manual

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  • IRS Further Clarifies Same-Sex Marriage Issues Affecting Cafeteria Plans

    Date:
    23 December 2013
    Type:
    News

    The Internal Revenue Service has issued Notice 2014-1, which further clarifies the various effects of the US Supreme Court's decision in US v. Windsor and IRS Revenue Ruling 2013-17, regarding same-sex marriage, on cafeteria plans, including flexible spending arrangements and health savings accounts.

  • IRS Announces 2014 Inflation Adjustments to Transportation Fringe Benefit Amounts, Standard Deduction and Other Benefits

    Date:
    01 November 2013
    Type:
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  • New Wisconsin Section Added on Benefits Taxation

    Date:
    30 September 2013
    Type:
    Editor's Choice

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  • Minnesota Issues Tax Guidance on Same-Sex Spousal Benefits

    Date:
    24 September 2013
    Type:
    News

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  • IRS Issues Guidance on Claiming Post-Windsor Payroll Tax Refunds, Credits and Adjustments

    Date:
    24 September 2013
    Type:
    News

    In the wake of the Supreme Court decision in United States v. Windsor and the holdings of the subsequent Revenue Ruling issued by the Internal Revenue Service (Rev. Rul. 2013-17) regarding the federal tax treatment of same-sex spousal health insurance benefits, the IRS has now issued much anticipated guidance (Notice 2013-61) for employers and employees on how to claim a refund, credit or adjustment of overpayments of FICA taxes and withheld federal income tax with respect to health insurance coverage and certain fringe benefits provided, and compensation paid, to same-sex spouses.