Overview: 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.
Author: Rena Pirsos, JD, Legal Editor
Updated to include final regulations on IRC Section 83(b) elections made by employees in regard to transfers of employer-provided stock.
Updated to include 2016 foreign housing-cost exclusion limitation and base housing amount.
In Notice 2016-06, the IRS provides correction procedures for fourth quarter Forms 941 and Forms W-2, in light of the retroactive increase in the 2015 monthly transit benefit limit under the PATH Act of 2015.
The Taxation of Employee Compensation section of the Employment Law Manual has been updated to include a number of important legislative and regulatory changes that occurred in late 2015 and early 2016.
This section helps HR and payroll professionals to understand how particular types of benefit plans must be structured and how to properly tax and report contributions, reimbursements and distributions in order to ensure compliance with the Internal Revenue Code.
President Obama has signed an omnibus appropriations bill (H.R. 2029) that will significantly impact payroll operations. The Protecting Americans From Tax Hikes Act of 2015 (PATH Act), which represents half of the bill, permanently extends parity between qualified (tax-free) employer-provided parking and commuter benefits and substantially revises the rules for filing Forms W-2, Wage and Tax Statement, and 1099-MISC, Miscellaneous Income. The Consolidated Appropriations Act of 2016, which is the other half of the omnibus bill, amends the Affordable Care Act.
The Taxation of Employee Compensation section of the Employment Law Manual has been updated to reflect several fourth-quarter 2015 developments.
Payroll tax laws affecting fringe benefits and other common employer payments.