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.


  • 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 2015.
  • Qualified transportation fringe benefits: The amounts that may be excluded from an employee's gross income for employer-provided qualified transportation fringe benefits for 2015 have been updated; the parity for mass transit benefits was restored retroactively for 2014.
  • FICA taxation of severance pay: The 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 IRS issued guidance in early 2015 explaining how it will apply the Supreme Court's decision to claims for refund of employment taxes paid on severance payments.
  • Final IRS regulations on reimbursement of local lodging expenses: Employees who are not away from home overnight may now be reimbursed for their local lodging expenses as a working condition fringe benefit.
  • Sick Pay Reporting: The IRS issued Notice 2015-6 to address several issues concerning the new Form 8922, Third-Party Sick Pay Recap.

Author: Rena Pirsos, JD, Legal Editor

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