Tuesday Tax Time: Fringe Benefits

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We’re doing a four part series on the IRS’s National Research Program, where they are going to be digging a little deeper into your employment tax returns.  goody, goody.

This week we’re on Fringe Benefits, or those little bitty benefits your employer gives you (like a cell phone) and tries to write off on their books and NOT count in your income.

The tax code basically says that any benefits paid to employees are taxable unless the tax code specifically excludes it.  For all my clients that like to call us and ask if your extra little benefit is taxable, that should answer your question.  The IRS even has a publication to explain the tax treatment of various employee fringe benefits: Pub 15-B, Employer’s Tax Guide to Fringe Benefits.  Good toilet reading.

And some benefits that are normally NOT taxable, like retirement plans or cafeteria pre-tax health plans could be taxable if they are offered to non-employees.  Be careful on this one – if you want to call your new hire an independent contractor, make sure you don’t put him/her on the Sect. 125 cafeteria plan, or BAM!, it’s all taxable to every employees.  These plans are for employees only!

So, if you are doling out sweet nuggets of goodness to your employees in the form of cell phones, meals, etc. make sure that the use is documented or the IRS will bust you while looking over your employment tax returns during their lovely little National Research Program.  Dougie pooh will get ya.

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