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 will affect the taxation of employee benefits in 2015!
Author: Rena Pirsos, JD, Legal Editor
The Taxation of Employee Compensation section of the Employment Law Manual has been updated to reflect several fourth-quarter 2015 developments.
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.
This section helps HR and payroll professionals comply with the federal income and employment tax laws governing compensation paid, and fringe benefits provided, to employees.
The Quick Reference chart, Annual Retirement Plan COLAs and Fringe Benefit Limitations, has been updated with the 2016 Fringe Benefit Inflation Adjustments.
This chart provides employers with a comparison of the current and prior year retirement plan cost of living adjustments and fringe benefit limitations. It helps employers ensure that they are withholding the correct amount of taxes from the pay of employees who receive various benefits. The chart will be updated annually when new amounts are announced by the Internal Revenue Service, which is usually by the end of October.
The Internal Revenue Service (IRS) has announced the tax year 2016 cost-of-living adjustments affecting dollar limitations on benefits and contributions under qualified retirement plans and other inflation-adjusted amounts. The pension plan limitations will not change for 2016 because the increase in the cost-of-living index did not meet the statutory thresholds that trigger their adjustment
The IRS has announced the 2016 annual cost-of-living adjustments made to several employee benefits and taxable amounts, based on changes to the Consumer Price Index. These are the maximum amounts that may be excluded in 2016 from an employee's taxable income for specific benefits.
Some states that require employers to withhold income taxes from employees' wages tie their definitions of "wages" to the federal Internal Revenue Code (IRC). However, many states update their IRC references to a specific date every year or so, while others roll their references into the current version of the IRC. Even with IRC conformity, some states have important exceptions. This Quick Reference chart summarizes each state's IRC conformity reference.
In-depth review of the spectrum of Mississippi employment law requirements HR must follow with respect to taxation of employee benefits.
HR guidance on the taxation of employee benefits.