VA. Sheriffs’ Association Annual Conference By Wendy Speelman

1. VA. Sheriffs’ Association Annual Conference By Wendy Speelman Federal, State & Local Government Specialist 9/16/14

2. Uniform Requirements For uniforms to be nontaxable and not be included in the employee’s wages they must: • Be required by employer to be worn • Must be in written policy • Can’t be optional if they wear them • Not be adaptable to every day street wear

3. How Clothing is Purchased • Uniform rules applies to: • If the employer purchases the clothing • If the employee purchases and the employer reimburses the employee • If purchased thru a rental company

4. Accountable Plan • Allowances paid through non- accountable plan are Taxable • If give employee $200 for uniform and they don’t provide substation (receipts) then must include in W-2 • Business Connection • Return excess in reasonable time

5. Law & Court Cases • If clothing suitable for taking the place of regular clothing, include in W-2 • IRC 162 & 262 • Mella v. Commissioner T.C. Memo 1968-594 • Not enough that the employee does not wear the clothing away from work • Pevsner v. Commissioner 628 F.2d 467

6. Examples of Non Uniforms • Ball Caps • T-shirts • Socks • All shoes unless steel toe (safety) • Tactical/BDU pants • Polo Shirts • Plain belts • Shorts • Under Armour • Gloves - patrolman • Sweatshirt • Carhart jacket • Jeans

7. Employer-Provided Vehicles • Personal Use is taxable & included in wages • Includes commuting • Business Use is not taxable • No record kept then all taxable • Exception: qualified non-personal use vehicle (QNPV)

8. Qualified Non-personal Use Vehicle • Must have policy on restricting personal use of the vehicle • Commuting is nontaxable to the employee • Substantiation and record keeping is not required

9. Examples of QNPV • Clearly marked police and fire vehicles if: • The employee is always on call • Require to be used for commute • The employer must prohibit personal use for travel outside of the officer jurisdiction • Readily apparent the vehicle is a public safety vehicle (words or painted insignia)

10. Examples of QNPV continued • Unmarked law enforcement vehicles if: • Any personal use must be authorized by the employer and must be incident to law-enforcement functions • The employer must be a govt. unit responsible for prevention or investigation of crime • Law enforcement officer must be full time, execute warrants, make arrests & carry firearm

11. Not a qualified vehicle

12. Day Meals • If the employer reimburses or pays for meals on a day trip then: • Include the cost of meal reimbursed to the employee in their payroll as a fringe benefit • Subject to Federal Income Tax, Medicare and SS if regular wages are subject to SS and Medicare • Revenue Ruling 75-432 & 75-170

13. Day Meals continued • If union contract says to pay for meals then reimburse but include in wages • If have policy to pay for meals if traveling out of county it is still taxable and included in wages • Must include in payroll the amount of lunch as a noncash item

14. Meals at Conferences • “Associated With” Meals - Tax-Free not included in wages • Meals at conventions • Meals at conferences • Does not include going to lunch with co-worker (this would be personal & taxable = include in wages)

15. Independent Contractor or Employee • Behavioral Control - how, when and where to do the work; training • Financial Control - significant investment, expenses, opportunity for profit or loss • Relationship of the Parties - employee benefits, written contracts

16. Resources • Publication 1779 - determination on status of worker as either an independent contractor or an employee • Publication 963 Chapter 3 • Revenue Ruling 87-41 – 20 factors • Internal Revenue Code 3401

17. Supplemental Pay • Compensation paid in addition to regular wages • Examples: overtime pay, bonus • Withhold federal income tax at 25% • Or use formula • Subject to Medicare and SS if applicable

18. Department of the Treasury Internal Revenue Service www.irs.gov