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FRINGE BENEFITS FOR PUBLIC EMPLOYERS

FRINGE BENEFITS FOR PUBLIC EMPLOYERS. Presented By:. John E. Givens Badge Number: 72-19527 FSLG Specialist Tax Exempt and Government Entities Internal Revenue Service 1110 Montlimar Drive, Suite 300 Mobile, AL 36609 (251) 341-5993 John.Givens@irs.gov. FSLG MISSION STATEMENT.

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FRINGE BENEFITS FOR PUBLIC EMPLOYERS

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  1. FRINGE BENEFITSFORPUBLIC EMPLOYERS

  2. Presented By: John E. Givens Badge Number: 72-19527 FSLG Specialist Tax Exempt and Government Entities Internal Revenue Service 1110 Montlimar Drive, Suite 300 Mobile, AL 36609 (251) 341-5993 John.Givens@irs.gov

  3. FSLG MISSION STATEMENT • Provide Government Entities top quality service by helping them understand and comply with their tax responsibilities and by applying the tax law with integrity and fairness to all.

  4. Fringe Benefits Defined: • A Fringe Benefit is something of value provided in connection with the performance of a service. • IRC 61(a): gross income includes all income, including Fringe Benefits. • Fringe Benefits are income unless specifically excluded by law.

  5. Accountable Plan IRC 62 • Method used to reimburse an employee • for substantiated business expenses • when expense allowance is used to cover expenses • Attributable to employer’s business activity

  6. Accountable Plan - IRC 62 Elements of an Accountable Plan • Business Connection • Substantiation • Return of Excess Amounts All three elements must be present or the payments are included as wages and subject to withholding.

  7. Accountable Plan IRC 62 • Fixed Date Method • Periodic Statement Method

  8. Types of Fringe BenefitsProvided by Employer: • Personal use of Employer’s Vehicle • Overnight Travel • Per Diem/Lodging • Meal Money • Clothing Allowances

  9. Use of Government Provided Vehicle The VALUE of personal use of an “Employer” provided vehicle is “income to the employee” and includes commuting to and from work. • There are three methods to determine value: 1. Cents- per -mile Rule (1.61-21(e)) 2. Commuting Value Rule (1.61-21(f)) 3. Lease Value Rule (1.61-21(d))

  10. Cents Per Mile Rule 48.5 cents per mile X personal miles used. To Qualify: • Must have regular business (> 50% business) • FMV of Vehicle < $15,100 (2007)* • Actually driven at least 10,000 miles per year • Vehicle is driven primarily by employees (Total value of personal use is included in employee’s wages)

  11. Commuting Rule $3.00 Per day or $1.50 per one-way commute. To Qualify: • Vehicle used for BUSINESS only. • Employee is required to commute in vehicle. • There is a written policy of “No Personal Use” (even if required to be “on call”) (Total value of personal use is included in employee’s wages)

  12. Lease Value Rule • Determine the FMV of the Vehicle. • Use annual lease values from PUB 15-B. • If employer pays for the fuel, add the value of the fuel. (may use 5.5 cents per mile)

  13. Special Rules You must use either the “Lease Value Rule” or “Cents-per-mile Rule” if the employee is: • An Elected Official • Earns over $133,900 (for 2006) and has only de-minimis personal use

  14. Exempt Vehicles (Qualified Non-Personal Use Vehicles) • Clearly Marked Police or Fire Vehicles • Unmarked Police Cars * • Ambulances or Hearses • Large Trucks • School Buses

  15. Non-Taxable Fringe Benefit:Meals and/or Lodging for the Convenience of Employer A Working Condition Fringe Benefit: • Provided “In Kind” (food/housing) • On the employer’s premises (same) • For the employer’s convenience • Required as a condition of employment (usually only housing)

  16. Other Non-Taxable Fringe Benefits- IRC 132 • De minimis Fringe Benefits (ex: gift ham) • Athletic Facilities (on premises) • Qualified Transportation Expense (ex: parking) • Working Condition (Employee Business Expense)

  17. Achievement Awards • Taxable • Non-Taxable • Nominal

  18. Education Benefits • IRC 127 - Qualified Education Assistance Program • IRC 132(d) - Working Condition Education Reimbursement • IRC 117 - Qualified Tuition Reduction

  19. Clothing Allowances • Required by employer, and • Not suitable for everyday wear, or • Protective Clothing Ex: Police and Firefighter’s Uniforms

  20. Employee owned Vehicle Allowances • Federal Rate (48.5 cents/mile for 2007) • Substantiation (written statement) • Taxability (excess reimbursement)

  21. Per Diem: Meals & Lodging • Reimburse Lodging, Meals, Incidentals • Business Expenses incurred while in travel status • Federal Rate • Day Meals

  22. Moving Expenses • An employee incurs qualified moving expenses • New job 50 miles farther from residence • Remain an employee for 39 weeks

  23. Rules for Withholding, Depositing & Reporting • Valuation of Fringe Benefit • Choice of Period

  24. Resources • Publication 15, 15-A, 15-B • Publication 463 • Publication 535 • Publication 963 (on line) • Publication 1542 • www.irs.gov • FSLG Specialist

  25. Questions???

  26. HOT TOPICS

  27. COMPLIANCE CHECKS and EXAMINATIONS

  28. The Compliance Check What to Expect

  29. Initial Appointment • Receive appointment letter or phone call • Request for information returns filed (941/W-3/W-2/1099/1096) • NOT an examination • NO books and records inspected • Publication 3114

  30. COMPLIANCE CHECK • Purpose is to verify accurate information return reporting and filing • Provide an opportunity to educate • Initial interview to determine filing requirements • Inspect filed and maintained information returns (941’s, 945, W-2’s, 1099’s, etc.)

  31. No Adjustment to Tax • May result in a voluntary agreement to correct errors • May follow-up with another compliance check or an examination

  32. CONCLUSION • Closing letter issued • May have discrepancy letter attached

  33. Employment Tax Examination What to Expect

  34. EXAMINATION • Same contact procedure as for Compliance Check • Initial Interview • Review books and records for the year(s) selected • Verify information on Forms 941, 945, W-2’s, W-3, 1099’s, etc.

  35. The Adjustment to Tax • May propose additional tax or reduction in tax • Based on evidence and application of the tax law • Entity given an opportunity to provide additional information • Issue Examination Report

  36. The Examination Report • Agree • Sign agreement and pay the tax (normally with no interest or penalty) • Expectation of future compliance

  37. The Examination Report • Disagree • Appeal Rights • Meeting offered with manager • 30 day letter issued • Assigned to Appeals Officer

  38. Appeals Process • Appeals Officer hears position • Settlement may be offered • If accepted, case closed with agreement • No settlement accepted, proceed to court

  39. FIREFIGHTERS See Handout

  40. Location: 82252 Event: 10 Activity: 2 Audience Code: 12 Please Date the Form

  41. Questions???

  42. Give me a break!

  43. Are you Hungry? Lunch Break Are you Hungry? Lunch Break

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