Providing non-taxable benefits for employees & business deductions for employers
All Benefits are NOT created equal. Some benefits are not included as income to your employees but ARE included as expenses for your business, which creates a win for your employees and a win for you, the business owner!
Fringe benefits differ from direct compensation in that they are not a payment of cash or its equivalent, but they do provide immediate economic and financial benefit to your employees.
Fringe benefits include items such as occasional meals, employee awards, or moving expenses. Although the amounts may be small, they can add up and some can easily cost thousands of dollars a year per employee. All payments, whether cash or noncash are taxable as income unless specifically excluded by law.
Below are some examples of fringe benefits that can be a win-win:
There are many fringe benefits that are commonly thought of as nontaxable, but are taxable. For example, health club memberships are a taxable fringe benefit unless you provide an athletic facility at the place of employment.
Health Savings Accounts (HSAs) are not taxable. However, reimbursements to your employees for their individual health insurance policies are taxable, and quite possibly are not in compliance with health care reform provisions! This could lead to penalties that can be quite steep. More about this in our May newsletter!
Fringe benefits do not include employer reimbursements or payments for employee activities in furtherance of the employer's business such as conventions, travel, meals, and entertainment. These are business expenses .
There are different rules for Partners and more than 2% shareholders of an S Corporation.
Need help? Give us a call, we can help you determine the right fringe benefits for you and your employees.
All Benefits are NOT created equal. Some benefits are not included as income to your employees but ARE included as expenses for your business, which creates a win for your employees and a win for you, the business owner!
Fringe benefits differ from direct compensation in that they are not a payment of cash or its equivalent, but they do provide immediate economic and financial benefit to your employees.
Fringe benefits include items such as occasional meals, employee awards, or moving expenses. Although the amounts may be small, they can add up and some can easily cost thousands of dollars a year per employee. All payments, whether cash or noncash are taxable as income unless specifically excluded by law.
Below are some examples of fringe benefits that can be a win-win:
- Occasional coffee and donuts, parties or tickets for entertainment
- Noncash small holiday gifts
- Noncash employee awards
- Employer-provided cell phones
- Employee discounts on company products
- Transportation benefits such as transit passes, parking and bike commuting
- Dependent care assistance
- Moving expenses
- Educational expenses
- Financial counseling
There are many fringe benefits that are commonly thought of as nontaxable, but are taxable. For example, health club memberships are a taxable fringe benefit unless you provide an athletic facility at the place of employment.
Health Savings Accounts (HSAs) are not taxable. However, reimbursements to your employees for their individual health insurance policies are taxable, and quite possibly are not in compliance with health care reform provisions! This could lead to penalties that can be quite steep. More about this in our May newsletter!
Fringe benefits do not include employer reimbursements or payments for employee activities in furtherance of the employer's business such as conventions, travel, meals, and entertainment. These are business expenses .
There are different rules for Partners and more than 2% shareholders of an S Corporation.
Need help? Give us a call, we can help you determine the right fringe benefits for you and your employees.
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