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Treatment of Fringe Benefits Under Different Employment Taxes

July 12, 1999
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Related Topics: Finance/Taxes, Featured Article, Benefits
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Issue: The Internal Revenue Code, IRS regulations and other IRS pronouncements spell out the treatment of various types of fringe benefits under the three types of employment taxes-FICA, FUTA, and income tax withholding. The chart below is designed to provide a quick reference to the employment tax treatment of various fringe benefits. In noting that a particular benefit is exempt from the employment taxes, it is assumed that the employer has complied with any special rules concerning such matters as nondiscrimination and recordkeeping.

 

Income tax withholding

Social security

Federal unemployment

Airplanes, business use

Exempt

Exempt

Exempt

Athletic facilities

Exempt

Exempt

Exempt

Awards and prizes

Generally taxable

Generally taxable

Generally taxable

Business expense reimbursement

Exempt

Exempt

Exempt

Cafeteria plans

Generally exempt

Generally exempt

Generally exempt

Cars, business use

Exempt

Exempt

Exempt

Commuter vehicles

Taxable

Taxable

Taxable

Computers, business use

Exempt

Exempt

Exempt

Conventions for business

Exempt

Exempt

Exempt

De minimis benefits

Exempt

Exempt

Exempt

Dependent care (limited to $5000)

Exempt

Exempt

Exempt

Discounts

Exempt

Exempt

Exempt

Education, business related

Exempt

Exempt

Exempt

Educational assistance

Exempt

Exempt

Exempt

Employee achievement awards

Exempt to extent it is reasonable to believe the amounts will be excludable from gross income under Code Sec. 74c

Health and accident insurance

Exempt

Exempt

Exempt

Home offices

Exempt if reimbursed home office expenses qualify as a working condition fringe benefit.

Legal service, group plans

Exempt (up to a premium value of $70 annually) for tax years beginning before July 1, 1992.

Life insurance premiums (first $50,000 in coverage)

Taxable

Taxable

Exempt

Loans with below market interest rates

Exempt (deemed payment must be shown on W-2)

Exempt (unless loans are compensation related).

Exempt (unless loans are compensation related).

Maternity/paternity benefits

Taxable during first six months of absence. Payments made after six months are exempt.

Meals/lodging on employer's premises for employer's convenience.

Exempt

Exempt

Exempt

Moving expenses

Exempt, if employer believes expenses are deductible by employee.

No-additional-cost service

Exempt

Exempt

Exempt

Parking facilities

Exempt

Exempt

Exempt

Product testing

Exempt

Exempt

Exempt

Security

Exempt

Exempt

Exempt

Supplemental unemployment compensation plan benefits

Taxable

Exempt

Exempt

Travel, business purpose

Exempt

Exempt

Exempt

Tuition reduction

Exempt

Exempt

Exempt

Uniforms

Exempt

Exempt

Exempt

Vacation pay

Taxable

Taxable

Taxable

Workers' compensation

Exempt

Exempt

Exempt

Working condition benefits

Exempt

Exempt

Exempt

Source: CCH Incorporated is a leading provider of information and software for human resources, legal, accounting, health care and small business professionals. CCH offers human resource management, payroll, employment, benefits, and worker safety products and publications in print, CD, online and via the Internet. For more information and other updates on the latest HR news, check our Web site at http://hr.cch.com.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion.

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