Payroll
Add fringe benefit income for appropriate employees
Worker benefits include a broad range of assistances—other than salary—that companies offer to their workers. Some of these benefits, such as workers' compensation, social security, and unemployment insurance, are required by law. The majority of benefits provided to employees, still, are conferred at the pleasure of the business owner. Such benefits, which are commonly called "fringe" benefits, range from such main expenditures as paid holidays, health insurance, paid vacations, employee stock ownership plans (ESOPs), and profit sharing to more modest "extras" like bestowing performance awards and prizes, provided that an employee lunchroom, or paying for a company picnic.
The Fringe Benefits
Certain fringe benefits are precisely excluded for FICA, FUTA, and federal income tax withholding purposes:
(1) Working condition fringe benefits,
(2) Skilled employee discounts,
(3) No additional cost services,
(4) Employer operated athletic facilities,
(5) De minimis fringe benefits,
(6) Qualified employer providing transportation benefits,
(7) Qualified tuition reductions for employees of educational institutions and
(8) Qualified employer reimbursed moving expenses.
All other fringe benefits are subject to income and employment taxes on the amount equal to the excess of their fair market value over any amount paid by the employee for the profits.
Employers might elect to treat fringe benefits as paid on a pay period, quarterly, semi-annually, annual, or other basis. The benefits should, still, be treated as paid no less regularly than annually.
Employers must regulate the actual value of taxable non-cash fringe benefits provided in a calendar year by January 31 of the following year.
The value of some of the benefits essentially provided in the last two months of the preceding calendar year may be treated as provided in the subsequent calendar year together with the value of the benefits provided in the first ten months of that subsequent calendar year.
The employer can add the value of fringe benefits to regular wages for a payroll period and figure the federal withholding taxes on the total or can withhold income tax on the value of the fringe benefits at the flat 25% rate appropriate to supplemental wages.
The value of the use of an employer provided car may be excluded from an employee's wages if the car can be considered a working condition fringe benefit. An employer might elect not to withhold on the value of the personal use of a car that is includible in the employee's income if the employer provides advance written notice of the election not to withhold by January 31 of the year to which the election applies or within thirty days after the date the employer first provid ed the car for the employee. The election to not withhold applies only to federal income tax; FICA taxes must be withheld regardless of the election.
An employer must deposit federal taxes withheld from fringe benefits according to the general deposit rules for that tax period. The value of fringe benefits might be reasonably projected for purposes of making appropriate deposits.
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