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HR Support on Uniform Allowances for Employees
Editor's Note: Will your uniform allowance policy withstand IRS scrutiny?
Overview: Uniforms that employees must wear as a condition of employment may be provided tax-free as a working condition fringe benefit so long as they are not adaptable to street wear or cannot be worn as ordinary clothing. Employers may provide employees with tax-free allowances to purchase uniforms if the apparel qualifies under the Internal Revenue Code (IRC) as a uniform and employees substantiate their expenses under the accountable plan rules of the IRC.
The following clothing qualifies as uniforms under the IRC:
- Riding apparel worn by a jockey;
- Baseball uniforms worn by professional baseball players;
- Uniforms worn by police officers, firefighters, letter carriers, nurses, bus drivers and railroad employees;
- Uniforms required to be worn by civilian faculty and staff members of a military school while on duty, if they are of a general military style and the buttons, insignia of rank and component designations are established by the school; and
- Protective clothing worn by commercial fishermen that are not adaptable to general use, such as oil clothes, work gloves and rubber boots.
The IRS generally does not consider work clothing that painters are typically required to wear by a union as distinctive enough in character to qualify as a uniform that can be provided to employees on a tax-free basis. If an employer pays for or gives an allowance to employees to purchase such clothing, the value of the clothing is taxable wages to the employees.
Note that under the Fair Labor Standards Act (FLSA), an employer cannot deduct from an employee's wages the cost to purchase and/or maintain a uniform required to be worn at work that cannot be worn as street wear if it would reduce the employee's wages below the federal minimum wage.
Rena Pirsos, JD, Legal Editor
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An explanation of the laws and regulations governing employer provided uniforms and uniform allowances.