Fringe Benefits and Federal Services Contracts - Why are they so important?
Fringe Benefits - APA Northstar Chapterapanorthstarchapter.org/.../09/Fringe-Benefits-2016... ·...
Transcript of Fringe Benefits - APA Northstar Chapterapanorthstarchapter.org/.../09/Fringe-Benefits-2016... ·...
Fringe BenefitsLuanne Brown, CPP
Director of Payroll Services Grand Valley State University
Why is it Taxable
I have to pay tax on that?
That’s stupid I don’t want to pay tax.
Don’t tax that.
Keep the gift card I refuse to pay tax on it.
Show me the IRS regulations.
No, I do not work for the IRS or the DOL
Luanne Brown, CPP
From Long Island to Florida to Michigan – Asking Why every step of the way.
First Job in Payroll was 1980 something (1988) (It was love at first sight)
Sports Academy, Wholesale Art Dealer, Advertising, Manufacturing, Higher Ed.
Currently the Director Of Payroll Services for Grand Valley State University (11 Years)
Became CPP in 2004
Survivor of DOL, IRS and ICE audits
Local Chapter involvement since 1998 – Have held all positions over the years.
Michigan Statewide Planning Committee – Current Chair
National Member since 2002
Active on many sub-committees, Board of Advisor 2012-2014, Vice President, Board of Directors 2015-2018
National Speakers Bureau.
IRS Process
You will notified by Mail
Respond Immediately
Form Team
Designate one spokesperson
Start reviewing your data before IRS arrives on site.
Provide data to IRS as requested don’t play games.
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Why Are You Being Audited
Your Website
Late or Missing 941’s
Other Audits (DOL, Immigration, State)
High Risk Industry
Trucking
Farming
A big change from year to year
3,000 w2’s last year, 300 this year?
No W2’s Filed
Big change in 1099 or 1042S forms
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What is NOT a taxable Fringefor Federal Tax Withholding.
Items Exempt from Federal Withholding
**With Limits
Accident and Health Benefits
Achievement Awards**
Adoption Assistance**
Athletic Facilities**
De Minimis Benefits**
Dependent Care Assistance**
Educational Assistance**
Employee Discounts**
Employee Stock Options**
Employer Provided Cell
Phone**
Achievement/Service
Awards Taxable Exclusions
The exclusion does not apply to awards of cash, cash equivalents, gift certificates, or other intangible property such as vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds and other securities these are taxable.
Specific Length of Service (5 yr. increments)
Safety award must be specific
$400 limit to value for each award
$1600 limit in one year to one employee
Adoption Assistance
Must have written plan
Cannot favor shareholders or owners
No discrimination is allowed
Less than 5% of the assistance may go to shareholders/owners owning more than 5% of the stock, capital, profits during the year.
IRS limit for 2016 $13,460
Excluded from Federal Income Tax Withholding
NOT excluded from Social Security and Medicare
Report in Box 12 Code T on W2!
Athletic Facilities
Can exclude from wages if athletic facilities are
located on-premises and is used primarily for
your employees, their spouses and their
dependent children.
Be careful! If you are selling memberships the
value may become taxable to your employees
De Minimis BenefitsExample of Items that are Non-Taxable
Occasional personal
use of company copy machine, phones,
laptops.
Holiday gifts of a low
fair market value
Sweatshirt, beach
chair, weather vane
Occasional parties and
picnics
Occasional tickets for
theater or sporting
events
Company provided
coffee and tea.
Working Condition Fringe
Business use of company car
or airplane
Chauffeur or bodyguard for
security
Professional Association Dues
and Membership Feeds
*** Group Legal Services
are TAXABLE!
Business Subscriptions
Job-related education
Goods used for product
testing by employees
Outplacement services
*** Tax preparation services
are NOT a working condition
fringe and is taxable.
Educational Assistance
Job-Related (Specific – Non-Taxable)
Non Job-Related (Must have a Plan)
No Discrimination, limited for owners, not part of cafeteria plan. Notification of plan, tied to grades
$5,250 exclusion textbooks included
Does NOT include:
Tools or Supplies
Lodging
Meals
Transportation
**Special Rules apply to Colleges and Universities
Employee Discounts
Can exclude if following criteria is met
Discount on service = cannot exceed 20% of the price
you charge nonemployee customers for the service
Discount on merchandise or other property your gross
profit percentage times the price you charge
nonemployee customers.
Watch out for discounts given to highly compensated
employees!
Employee Stock Options
Incentive Stock
Employee Stock Purchase Plans
Non-statutory/Nonqualified Stock Options
*** Internal Revenue Code 421, 422, and 423
Employer Provided Cell Phone
Must be provided for NONCOMPENSATORY
business purposes.
Contact at all times for work related issues.
Speak with customers/clients while away from
office.
If provided to promote goodwill, boost morale or
attract prospective employees the value is
TAXABLE
Club Memberships
Examples of Clubs:
Country Clubs, Golf an Athletic Clubs, Airline Clubs, Hotel Clubs, etc…
To be NON-TAXABLE it must be work related.
Meeting potential clients for a round of golf.
Must be substantiated – names, dates topics discussed etc…
Group Term Life
Insurance
Exclude the first $50,000 from wages.
Exclude the first $2,000 of coverage for spouses
Over limits follow IRS table for calculation
Report Box 12 Code C on W2
Lodging
You can exclude from taxable wages if:
It is furnished on your business premises
It is furnished for your convenience
The employee must accept it as a condition of
employment
***The exclusion is void if you allow your employee to
choose to receive additional pay instead of Lodging.
Meals Taxable
Same day travel
Provided more than occasionally
Examples of Non Taxable Meals:
Coffee, Doughnuts, Soft Drinks, Fruit
Occasional meals or meal money if
employee is working occasional
overtime
Occasional parties or picnics.
Meals provided on premises
Available to all employees or none!
Moving Expenses
Deductibility
Distance Test – 50+ Miles
Time Test – Must be employed for 39 weeks during
the 12 months following the move.
Deductible (qualified, nontaxable) moving expenses
Transportation of Household Goods
Expenses of traveling from old residence to new residence (excluding meal)
Members of household included (pets too!)
Moving Expenses Continued
Nondeductible (nonqualified, taxable) moving expenses
Meals while in transit
House hunting trips
Real estate expenses(closing costs, down payments
etc.)
Storage after initial move (30 day rule unless moving
International)
Mileage reimbursed over .19 cents per mile (2016)
Reporting of moving expenses
Deductible (non-taxable) - Box 12 Code P
Nondeductible – Included in taxable wages Box 1,3,5
IRS Publication 521
Personal Use of Company Provided
Vehicle
Accounting for Use – Valuation Methods
General Valuation Method
Special Valuation Methods
Commuting Valuation Method ($1.50 each way)
Annual Lease Valuation Method (IRS Table)
Vehicle cents-per-mile Method (.54 cents x personal mile)
Be Consistent!
Employer may decide not to withhold Federal Tax
Maintain all logs for IRS review
Transportation Benefits
PATH – Protecting Americans From Tax Hikes 2015 –permanent.
Commuter Highway Vehicle Transportation and Transit Passes
$255 per month in 2016
Qualified Parking
$255 per month in 2016
Bicycle Commuting Reimbursement
$20 per month for months that qualify.
Substantial portion of travel from residence to place of employment
Does not receive commuter highway vehicle transportation, transit pass or qualified parking benefit.
Gift Cards, Gifts, Prizes
Incentives
ALL gift cards are taxable just like cash.
Incentives to participate in surveys
Prizes won at picnics and parties
Are they low in value?
Are they gift cards?
Is it a vacation?
Uniforms
Can they be worn as street clothes?
Do you give a cash allowance?
Misc. Cheat Sheet 2016 Cents-per-Mile
54 Cents business mileage rate
19 cents for medical and moving
14 cents for service to charitable organizations
Flexible Spending Accounts (FSA)
$2,550.00
Additional Medicare Tax Withholding
0.9%(.009) on wages in excess of $200,000.00
High Deductible Plan (1,300 single or $2,600 family)
$3,350 single $6,750 family
$4,350 single $7,650 family – Over 55 years (increase by $1,000)
401(k), 403(b), 457 limits
$18,300 (Additional $6,000 catch up for 50+ yrs)
Are you a Detective?
Make friends with the AP department
Travel and Expense Reports
Look for unusual payments to employees
Talk to HR
Become a resource for your company
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Questions?!?!?
Resources Used
The Payroll Source – 2016
Employer’s Tax Guide to Fringe Benefits – IRS Publication 15-B
https://www.irs.gov/pub/irs-
pdf/p15b.pdf?_ga=1.88508699.1628373674.1471958655
Contact Information
Luanne Brown, CPP
Grand Valley State University, Allendale Michigan
Direct Line: 616-331-2255