Understanding Fringe Benefits and Tax Implications

1. Fringe Benefits IRS Publication 15-B

2. Supplements C-E • What are Fringe Benefits? • Form of Pay for or related to Services • Does not have to be your employee • Subcontractor • Family member of employee • Client • You are the provider of the Benefit • You may or may not be the DIRECT provider

3. Taxable? • Any benefit that is provided IS taxable unless specifically excluded by law • Cash or Cash Equivalents are ALWAYS Taxable • De Minimus may not apply due to frequency or expectation – Thanksgiving Turkey • Value is Fair Market Value or the amount paid – whichever is greater

4. Cafeteria Plans • Written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. • Accident and Health Insurance Plans • Adoption Assistance • Dependent Care Assistance • Group Term Life Insurance • Health Savings Accounts for Long term care insurance premiums

5. Taxable or Not? • If certain conditions are met the fringe benefit provided may not be taxable. • DOCUMENTATION is a must • Authorization is a must • The following examples are limited and further review might be needed.

6. Fringe Benefits not Taxable - IF • Achievement Awards • Athletics Facilities • De minimis ** • Educational Assistance - up to $5250 per year • Employee Discounts • Employer Provided Cell Phones • Lodging on premises

7. Fringe Benefits not Taxable - IF • Meals • Moving Expense Reimbursement - meals not included • No Additional Cost Services ** • Transportation Benefits - local travel, transit pass • Tuition Reduction - educational organization only • Working Condition Benefits - property/services provided to employee so they can perform their job

8. De Minimis • Cash or Cash Equivalents are always taxable! • Occasional Personal use is not taxable • Holiday gifts with low fair market value • Meals - low fair market value and infrequent or for employer convenience • Occasional Parties and Picnics for Employees and families • Occasional tickets that do not meet the No Additional Cost

9. No Additional Cost • Services provided to employee that doesn’t cause the employer any substantial additional costs • Tickets due to excess capacity (airline, bus, etc.) • Athletic Facilities • Employee Discounts – 20%

10. Exceptions • Employer Provided Cell Phones • Need to contact employee • Requirement to be available to clients • Meals • Occasional or of little value • For convenience of employer

11. Exceptions • Lodging on Your business premises • Furnished on your business premises • Furnished for your convenience • Must accept it as a condition of employment • Different Test Apply to Educational Institutions – Section 119(d) • Does not apply if the employee has a choice to receive Lodging or pay in lieu of

12. Vehicles/Cell Phone • Lease FMV • Mileage Log must be maintained • Reportable and Personal Use is taxable • Car Stipend • Set amount each month. • Taxable • Cell Phone • Taxable Cash stipend • Parking - $210.00 per month, Transit passes - $130.00

13. Disclaimer • This presentation is not intended to be all encompassing but only an overview of some of the items/situations that arise and is for discussion purposes only. • For a more detailed analysis of a particular situation please feel free to contact me at any time. • Andrea Scheuering 406.243.5199 andrea.scheuering@mso.umt.edu • Thank you for attending!