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Pittsburg State University Clothing purchased for employees: fUND & TAXABILITY issuesMAY 2010
Provide guidance on the taxability of clothing purchased for employee wear. Provide information on what funding sources may be used for clothing purchases. Apply consistently across campus. Ensure compliance with IRS regulations. pURPOSE of policy
A fringe benefit is a form of pay for the performance of services. • Examples: • Employer-Provided Vehicle or Transportation • Athletic Facility • Educational Assistance • Employer-Provided Lodging • Any fringe benefit provided by the employer is taxable and must be included in the recipient's pay unless the law specifically excludes it. Irs Publication 15-B: Fringe benefits
Fringe benefits that are excluded from taxation include: • De minimis (minimal) benefits (cost and frequency) • Working condition benefits Irs Publication 15-B: Fringe benefits
Working Condition Benefits are not taxable to the employee. • Applies to property and services provided to an employee to perform his or her job. • Applies to the extent that the employee could deduct the cost of the property or service as a business expense or depreciation expense if he or she had paid for it. Irs Publication 15-B: Fringe benefits
Individual can deduct only unreimbursed employee expenses that are ordinary and necessary. An expense is ordinary if it is common and accepted in your trade, business, or profession. An expense is necessary if it is helpful to your business. An expense does not have to be required to be considered necessary. Irs Publication 529 - deductions
Individual may be able to deduct the following as unreimbursed employee expense: • Work clothes and uniforms if required and not suitable for everyday use. • “It is not enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.” Irs Publication 529 - deductions
Kansas law prohibits state employees from accepting or requesting meals, gifts, entertainment and travel with a few exceptions: • State employees are prohibited from soliciting or accepting any gift because of his/her official position. • Exceptions: • Gifts valued at less then $40 given at ceremonies or public functions when attended in your capacity as a state employee. • Gifts from relatives or personal friends. • Gifts accepted on behalf of the state that become the property of the state. (Source: SOK Governmental Ethics Commission – Conflict of Interest Guidelines for State Employees) State of kansas - Gifts
Uniform Business attire Protective clothing Other clothing TYPES OF CLOTHING Purchased
Required by PSU to be worn in the performance of assigned duties. Not suitable for taking the place of regular clothing. Remains the property of PSU. TYPES OF CLOTHING purchased- UNIFORM • Departments with approved Uniforms: • University Police (police officers only) • Student Health Center (medical staff only)
A shirt is the only item of clothing that qualifies as Business Attire. Makes the employee easily identifiable as a PSU employee who is serving in an official capacity. “Pittsburg State University”, “PSU” or the PSU logo and the name of the College, Department or group printed or monogrammed where it is clearly visible. Worn at work and/or at events specified by the Dean, Director or Chair and only when serving in an official capacity for PSU. Cannot be worn for everyday wear. Remains the property of PSU until the purchase value is depreciated. TYPES OF CLOTHING purchased– business attire Department has a written policy covering these items.
Worn over or in place of regular clothing to protect the employee from damage or abnormal soiling, or to maintain a sanitary environment. May include serving aprons, laboratory coats and shop coats. TYPES OF CLOTHING purchased – protective clothing
Any article of clothing that does not meet the definition of Uniform, Business Attire or Protective Clothing. TYPES OF CLOTHING Purchased – other clothing
May use General Use funding (OOE). FUNDING – Uniforms & Protective clothing
May be paid from • Restricted Fee accounts • Foundation accounts • Local accounts • If paid from a Restricted Fee account supported by student fees, program must allow the purchase of clothing. • If purchased for a specific event, the event must be recognized on the shirt (e.g. Pitt Cares, RHA, Rumble in the Jungle, Grad Finale, SAC). FUNDING – Business attire
May be purchased by the department but ONLY from Foundation accounts. FUNDING – other clothing
If money is collected from individuals for the cost of clothing, deposit funds in a restricted fee account. Sales tax must be collected. Department is responsible for depositing money collected from individuals with the Cashier’s Office. A list of the individuals, as well as proof of deposit(s) must accompany the request for payment to the clothing vendor. No advancement of PSU funds may be used to purchase clothing when it is being paid for by an individual. FUNDING - MISCELLANEOUS
Uniforms, Business Attire & Protective Clothing: NOT A TAXABLE FRINGE BENEFIT TO THE EMPLOYEE Other Clothing: TAXABLE FRINGE BENEFIT TO THE EMPLOYEE UNLESS THE VALUE OF THE CLOTHING IS DE MINIMIS ($15 or less per item) taxability Note: Items that cost $15 or less are not de minimis if provided to the employee on a regular basis.
If the clothing is a taxable fringe benefit to the employee, the cost of the item adds to the following: • Added to Federal Taxable Gross (Employee) • Added to State Taxable Gross (Employee) • Added to Social Security & Medicare Gross (Employee & Employer) • Added to KPERS Gross, including Buyback (Employee & Employer) • Added to Unemployment Compensation Insurance Gross (Employer) • Added to Workers Compensation Insurance Gross (Employer) • Added to Death & Disability Gross (Employer) taxability
Taxability determination must be made if a department wants to purchase an item of Other Clothing as Business Attire. Taxability Determination of Taxability Form – Clothing Purchased for Employee(s)
Dean, Director or Chair determines the appropriateness of the clothing expenditure. • Decision Factors: • Cost • Budget • Business Use • Public Contact • Personal Safety • Consistency • Approval of Dean, Director or Chair is required on the invoice. Authority & responsibility
If Uniforms or Business Attire are purchased for employees, a departmental policy should include the following: • List of employees and/or positions eligible for Uniforms or Business Attire. • Frequency of purchase. • Dollar limit of clothing item, if applicable. • Specific time/events when clothing is to be worn. • Statement that the clothing is to be worn only while performing official PSU duties. • Disposition of clothing item when employee leaves employment. • Depreciation time frame for clothing. • The policy should be communicated to the employees who are provided with the Uniforms or Business Attire. Authority & responsibility
Department purchases the Uniforms, Business Attire (Shirts), Protective Clothing or Other Clothing . • Initiate payment using a Department Purchase Request (DPR) or the PSU Business Procurement Card (BPC): • Note on the invoice or attach a paper listing the names of the employees, their PSU ID#’s and the clothing items attributed to each. • Include proof of deposit if money collected from individuals for the cost of clothing was deposited in a restricted account. • Approval for the use of funding by the authorized signature and approval for the purchase of clothing are required. If the authorized signature is a Director, Chair or higher, the authorized signature can approve the purchase as well as the use of the funding. It the authorized signature is lower than a Director or Chair, an approval signature from the appropriate Director, Chair or higher is also required on the invoice. • Submit the invoice with required employee information and approvals with the DPR or BPC log. • Note that departmental adherence to the clothing policy is implied by the signature approval provided on the payment request. Procedures for purchase & Payment
Department will follow the procedures previously noted. The Business Office will send the list of employees who receive items of Other Clothing that cost more than $15 per item to HRS to be included as a taxable fringe benefit to the employee(s) receiving the items. Note that Other Clothing can only be paid from Foundation funds. The department may request a review to determine if the Other Clothing items qualify as Business Attire (not a taxable fringe benefit). To initiate a review, PRIOR TO SENDING the payment request to the Business Office, the department completes a “Determination of Taxability Form” and submits to HRS with the DPR/BPC log, invoice and the information previously noted. Upon completion of the, review, HRS will notify the department of the decision and forward all documents to the Business Office for payment. Procedures for purchase & Payment – Other clothing
Periodic audits will be conducted by PSU’s Internal Auditor to ensure compliance. auditing
miscellaneous • This policy does not apply to clothing purchased for hospitality, promotional items, gifts, etc. • Departments that purchase clothing for these reasons must include on the DPR or BPC log the reason for the purchase (e.g. “Shirt will be used as a door prize at the Classified Staff Recognition Picnic on Thursday, June 3, 2010).
Fund Issues: • Geri Krumsick (firstname.lastname@example.org or x. 4150) • Christina Davis (email@example.com or x. 4159) • Kim Wilson (firstname.lastname@example.org or x. 4168) • Taxability Issues: • Michele Sexton (email@example.com or x. 4188) • Diane Letner (firstname.lastname@example.org or x. 4096) For more information