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 2014!
Author: Rena Pirsos, JD, Legal Editor
Courts in Colorado, Indiana and Virginia have held that state laws banning same-sex marriage are unconstitutional. However, each decision has been stayed and same-sex couples in these states currently cannot get married.
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.
To prevent identity theft, the IRS has issued final regulations permitting the use of Truncated Taxpayer Identification Numbers (TTINs) on certain federal tax-related payee statements, but not on Form W-2.
Employers are seeing significant changes when it comes to same-sex marriages and other relationships in the workplace. Several states recognize same-sex marriage and extend the same rights and benefits to both same-sex opposite-sex married couples.
The legalization of same-sex marriage potentially requires employers to provide benefits such as health care coverage and leave time to a broader range of employees, which may also have tax implications.
The FAQs provide answers to some of the most commonly asked questions about the dependent coverage requirements of the Affordable Care Act.
The Internal Revenue Service has released the calendar year 2015 inflation-adjusted amounts for health savings accounts (HSAs) as determined under § 223 of the Internal Revenue Code.
State references to the definition of "wages" in the Internal Revenue Code that were recently updated in Iowa, Kentucky, Maine, Minnesota, Nebraska, Oregon, South Carolina and West Virginia have been included in the State Internal Revenue Code Conformity - Chart in the Quick Reference Tool. The Taxation of Employee Compensation: Minnesota section of the Employment Law Manual has also been updated.
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.
The IRS issued Notice 2014-19 and related Frequently Asked Questions providing guidance on how qualified retirement plans should treat same-sex spouses following the Supreme Court's decision in United States v. Windsor. Employers must take action to ensure that plan documents and operations conform to requirements.
HR guidance on the taxation of employee benefits.