Overview: Most employers offer several different types of employee benefits, such as health insurance, sick pay, disability pay, workers' compensation insurance and retirement savings plans. Whether employer and employee contributions and benefit payments received by employees are subject to withholding for certain payroll taxes, such as federal income tax (FIT), Social Security and Medicare (FICA) taxes or federal unemployment (FUTA) tax, varies among benefit types.
Trends: The following important issues have an effect on the taxation of employee benefits:
Author: Rena Pirsos, JD, Legal Editor
Updated to include new withholding and reporting requirements for Qualified Small Employer HRAs, effective November 20, 2017.
Updated to reflect 2018 inflation-adjusted amounts.
The IRS has released the 2018 cost-of-living adjustments (COLAs) to the dollar limitations on benefits and contributions to qualified retirement and deferred contribution plans, such as § 401(k) plans, and the inflation-adjusted fringe benefit limitations.
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This section helps HR and payroll professionals understand the laws and regulations that must be complied with when employees are sent to work abroad or are brought from abroad to work in the US.
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In an information letter, the IRS concludes that benefits an employer provides under its company parking policy are taxable income to the employees that choose to use the benefit.
HR guidance on the taxation of employee benefits.