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HR Support on Fringe Benefits
Editor's Note: Keep up with regulations on fringe benefits and other payments!
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.
Trends:
- Final IRS regulations: Effective August 1, 2012, employers may use the general valuation rule to value certain noncommercial entertainment flights.
- 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 definition of a reimbursement or other employee expense allowance arrangement is clarified; the substantial risk of forfeiture conditions for stock transfers made on or after January 1, 2013 are explained.
- An IRS revenue ruling illustrates various types of plans that will be deemed nonaccountable, and therefore fully taxable, for failure to meet the business connection requirement of the accountable plan rules.
- In a long awaited ruling, the Sixth Circuit Court of Appeals held in United States v. Quality Stores, Inc., 2012 U.S. App. LEXIS 18820 (6th Cir. Sept. 7, 2012), that severance payments to terminated employees were supplemental unemployment benefits and not FICA or FUTA taxable. US employers that have paid severance pay to terminated employees are left to question whether to file FICA tax refund claims and stop withholding and paying FICA taxes on severance pay.
Rena Pirsos, J.D., Legal Editor
Latest items in Fringe Benefits
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Taxation of Employee Benefits
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.
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IRS Issues Additional Payroll Tax Refund Procedures
The Internal Revenue Service (IRS) has posted additional procedures explaining how employers and employees can obtain refunds of overpaid federal income, Social Security and Medicare (FICA) taxes after the 2012 transportation fringe benefit limits were retroactively increased by the American Taxpayer Relief Act (ATRA) of 2012.
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Should the value of side trips made for personal errands while using a company vehicle be included in an employee's taxable income?
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Aircraft Terminal Charge and SIFL Mileage Rates Issued for First Half of 2013
The US Department of Transportation has released the terminal charge and standard industry fare level (SIFL) mileage rates for the first half of 2013. These rates are revised semiannually and are used by the Internal Revenue Service (IRS) to determine the value of noncommercial flights on employer provided aircraft under the aircraft valuation method for withholding tax purposes.
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Aircraft Terminal Charge and SIFL Mileage Rates Issued for First Half of 2013
The US Department of Transportation has released the terminal charge and standard industry fare level (SIFL) mileage rates for the first half of 2013. These rates are revised semiannually and are used by the Internal Revenue Service (IRS) to determine the value of noncommercial flights on employer provided aircraft under the aircraft valuation method for withholding tax purposes.
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Taxation of Employee Compensation
Employees' salary and fringe benefits are subject to federal income taxes, Social Security and Medicare taxes, and federal unemployment insurance tax. However, certain cash and noncash fringe benefits may be offered to employees on a tax-free basis, while an otherwise tax-free fringe benefit becomes taxable compensation to employees if employers do not meet the rules for that particular fringe benefit .This section assists HR professionals in determining which fringe benefits (e.g., company car, health benefits) and other compensation (e.g., bonuses, awards) are taxable or not.
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Transportation Resource Center for HR: Payroll
XpertHR's Transportation Resource Center for HR: Payroll helps transportation industry employers handle their most vexing employment issues by bringing relevant resources together in one place for easy access.
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IRS Releases 2013 Employer Tax Guides, Levy Tables and Corrected Form W-4
The Internal Revenue Service (IRS) has released the 2013 versions of some of the key publications that help employers meet their payroll tax responsibilities: Circular E, Employer's Tax Guide (Publication 15); Employer's Supplemental Tax Guide (Publication 15-A); Employer's Tax Guide to Fringe Benefits (Publication 15-B); and Publication 1494, Tables for Figuring Amount Exempt from Levy on Wages, Salary and Other Income. The IRS has also re-issued a corrected version of the 2013 Form W-4, Employee's Withholding Allowance Certificate.
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IRS Issues Guidance on How to Apply the Retroactive Increase in Excludable Transit Benefits
The IRS has issued special administrative procedures allowing employers to correct the retroactive increase in the maximum excludable amount for 2012 qualified transit benefits on fourth quarter Form 941 and Form W-2.
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Impact of the American Taxpayer Relief Act of 2012 on Payroll
The American Taxpayer Relief Act of 2012, signed into law on January 2, 2013, made several payroll related changes. To help employers understand the impact of the new law, XpertHR has updated several sections of the Employment Law Manual and all related Worked Examples and How To tools.
About this topic
Payroll tax laws affecting fringe benefits and other common employer payments.
Fringe Benefits: Key Items
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Taxation of Employee Compensation
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IRS Announces 2013 Inflation Adjustments
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IRS Issues Guidance on How to Apply the Retroactive Increase in Excludable Transit Benefits
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Employee Business Expense Substantiation Policy
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Calculation of Excess Group Term Life - Worked Example
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What qualifies as a working condition fringe benefit?
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What requirements must an educational assistance plan meet for favorable tax treatment of benefits?