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Publication 15-B Provides an Overview of Fringe Benefits

Publication 15-B Focuses on Taxation of Fringe Benefits

Publication 15-B provides an overview of fringe benefits as well as sections on fringe benefit exclusion rules and fringe benefit valuation rules. In addition, guidelines for withholding, depositing, and reporting taxable non-cash fringe benefits are also provided.

New Items for 2011

There are several new items in the revised Publication 15-B. Among them are changes in the following areas:

• Combined Commuter Highway and Transit Passes Exclusion
• Benefits for Volunteer Firefighters and Emergency Medical Responders
• Simple Cafeteria Plans
• Cents-per-Mile Rule

Publication 15-B Is a Supplement To Publication 15

Contact Vision Payroll if you any questions on Publication 15-B.

In the recently released Chief Counsel Advice (CCA) 200923029, the Internal Revenue Service ruled that discounts provided to an employer’s employees who purchase or lease property from a company that formerly owned the employer are taxable as fringe benefits based on the amount of the discount. Such discounts are also taxable for FICA purposes. FICA is also known as OASDI or social security and Medicare.

Qualified employee discounts are excludible from income under §132 of the Internal Revenue Code of 1986 (IRC). Since “the discounted property was not offered for sale to customers by the same employer for which the employees receiving the discount performed the services”, the discounts were not “qualified employee discounts” under IRC §132. These amounts are to be reported on Form W-2, even for former employees. They should not be reported on Form 1099.

Since the discount was offered as a percentage off the retail price, the discount may be valued for fringe benefits purposes at the amount of the discount.

Contact Vision Payroll if you have any questions on taxation of fringe benefits.

Responding to a request from Senator Richard Shelby (R-Ala.), the IRS stated that there is no dollar limit imposed by law on de minimis fringe benefits. A constituent had written to Shelby and stated that the constituent’s employer required all non-cash gifts valued over $50 to be processed through payroll and all required taxes to be withheld. According to §132(e)(1) of the Internal Revenue Code of 1986 (as amended), “‘de minimis fringe’ means any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer’s employees) so small as to make accounting for it unreasonable or administratively impracticable.” Setting of a dollar limit would, in of itself, require accounting for items. Therefore, no dollar limit on de minimis fringe benefits is set by law. Treasury Regulations §1.132-6(e) gives examples of de minimis fringe benefits such as “occasional typing of personal letters by a company secretary; occasional personal use of an employer’s copying machine, provided that the employer exercises sufficient control and imposes significant restrictions on the personal use of the machine so that at least 85 percent of the use of the machine is for business purposes; occasional cocktail parties, group meals, or picnics for employees and their guests; traditional birthday or holiday gifts of property (not cash) with a low fair market value; occasional theater or sporting event tickets; coffee, doughnuts, and soft drinks; local telephone calls; and flowers, fruit, books, or similar property provided to employees under special circumstances (e.g., on account of illness, outstanding performance, or family crisis).” Contact Vision Payroll if you have any questions.