- info@kaizencpa.com
- Our Office: USA - Hong Kong - Shenzhen - Shanghai - Beijing - Taiwan - Singapore - Japan - UK
+852 2341 1444(Hong Kong)
Search for anything.
Knowledge
- Home
- Knowledge
- Are Employee Fringe Benefits Taxable in U.S.
2023-10-25Are Employee Fringe Benefits Taxable in U.S.
Employers can offer fringe benefits to employees; common fringe benefits include health insurance, retirement plans, and parking passes. Although most employee fringe benefits are nontaxable and may be excluded from an employee’s income, some benefits must be reported on the employee’s Form W-2 and included in your taxable income. This article will discuss some common fringe benefits for your reference.
Retirement Plans
Employer contributions on behalf of their employees’ qualified retirement plans are not taxable to the employees when they are made. However, when the employee receives the distributions from a retirement plan, the amounts you received are taxable income.
Accident and Health Benefits
If an employer pays the cost of an accident or health insurance plan for an employees, including an employee’s spouse and dependents, the employer’s payments are not wages and are not subject to Social Security, Medicare, and FUTA taxes, or federal income tax withholding.
Group-Term Life Insurance Coverage
Up to $50,000 of life insurance coverage may be provided as a nontaxable benefit to an employee. The cost of insurance coverage on policies that exceed $50,000 is a taxable benefit. If an employer provides more than $50,000 of coverage, the amount included in the taxpayer’s income is reported as part of your taxable wages on Form W-2.
Employer-Provided Meals and Lodging
If the meals and lodging provided to the employees on the employer’s business premises and for the employer’s convenience, the benefits will be nontaxable.
Transportation Fringe Benefits
Qualified transportation benefits included transit passes, paid parking, and a ride in a commuter highway vehicle between the employee’s home and workplace. Please note that due to TCJA, the amounts are no longer deductible by the employer, but transportation benefits are still non-taxable to the employee. The limit is $265 for parking and transit benefit per month in 2019. The use of a company car for commuting purpose or other personal use is generally a taxable benefit for the employee.
Entertainment Benefits
The entertainment benefits provided to an employee is a taxable fringe benefit and should be included in the taxable income. The entertainment benefits include concert event ticket, sports event tickets, club membership and other benefits.
De Minimis Benefits
A de minimis benefit is any property or service the employer provides to the employee that has so little value that accounting for it would be unreasonable or administratively impracticable. Cash and cash equivalent fringe benefits (for example, gift certificates, gift cards, and the use of a charge card or credit card), no matter how little, are never excludable as a de minimis benefit. However, meal money and local transportation fare, if provided on an occasional basis and because of overtime work, may be excluded.
Employer-Provided Cell Phone
The value of the business use of an employer-provided cell phone, provided primarily for non-compensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. Personal use of an employer-provided cell phone, provided primarily for non-compensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit.
[Reference]:
https://www.irs.gov/publications/p15b#en_US_2020_publink1000193672
Retirement Plans
Employer contributions on behalf of their employees’ qualified retirement plans are not taxable to the employees when they are made. However, when the employee receives the distributions from a retirement plan, the amounts you received are taxable income.
Accident and Health Benefits
If an employer pays the cost of an accident or health insurance plan for an employees, including an employee’s spouse and dependents, the employer’s payments are not wages and are not subject to Social Security, Medicare, and FUTA taxes, or federal income tax withholding.
Group-Term Life Insurance Coverage
Up to $50,000 of life insurance coverage may be provided as a nontaxable benefit to an employee. The cost of insurance coverage on policies that exceed $50,000 is a taxable benefit. If an employer provides more than $50,000 of coverage, the amount included in the taxpayer’s income is reported as part of your taxable wages on Form W-2.
Employer-Provided Meals and Lodging
If the meals and lodging provided to the employees on the employer’s business premises and for the employer’s convenience, the benefits will be nontaxable.
Transportation Fringe Benefits
Qualified transportation benefits included transit passes, paid parking, and a ride in a commuter highway vehicle between the employee’s home and workplace. Please note that due to TCJA, the amounts are no longer deductible by the employer, but transportation benefits are still non-taxable to the employee. The limit is $265 for parking and transit benefit per month in 2019. The use of a company car for commuting purpose or other personal use is generally a taxable benefit for the employee.
Entertainment Benefits
The entertainment benefits provided to an employee is a taxable fringe benefit and should be included in the taxable income. The entertainment benefits include concert event ticket, sports event tickets, club membership and other benefits.
De Minimis Benefits
A de minimis benefit is any property or service the employer provides to the employee that has so little value that accounting for it would be unreasonable or administratively impracticable. Cash and cash equivalent fringe benefits (for example, gift certificates, gift cards, and the use of a charge card or credit card), no matter how little, are never excludable as a de minimis benefit. However, meal money and local transportation fare, if provided on an occasional basis and because of overtime work, may be excluded.
Employer-Provided Cell Phone
The value of the business use of an employer-provided cell phone, provided primarily for non-compensatory business reasons, is excludable from an employee's income as a working condition fringe benefit. Personal use of an employer-provided cell phone, provided primarily for non-compensatory business reasons, is excludable from an employee's income as a de minimis fringe benefit.
[Reference]:
https://www.irs.gov/publications/p15b#en_US_2020_publink1000193672
Disclaimer
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
WhatsApp/Line/Wechat: +852 5616 4140
All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.
WhatsApp/Line/Wechat: +852 5616 4140
Related Posts
Introduction to U.S. HR Team Structures, Budgets & Compliance Audits
When each HR team is responsible for managing over 80 employees, optimizing departmental structure and budget management while reducing compliance risks has become crucial to organizational success. When HR architecture align with organizational complexity, budgetary capacity, and proactively mitigate audit liabilities, this function becomes indispensable.
How to Make a Job Offer of the U.S. Company (IV)
In addition to the job offer requirements and employee benefits outlined in the previous articles, companies often offer a number of other benefits that can be discussed with candidates before making an offer. This article will introduce some of the most common benefits companies may provide.
Risks of Carrying Out Work on a U.S. B Visa
The B visa is one of the most common visas for visitors to the United States. It comes in two categories: the B-1 visa, for short-term business visits, and the B-2 visa, for tourism or medical treatment. Travelers may also be issued a combination B-1/B-2 visa, valid for both purposes. Typically, a visitor may be admitted for up to six (6) months at a time, with the possibility of requesting an extension if necessary.
Introduction to U.S. Capital Asset
A business asset refers to a valuable item owned by a company, including a wide range of categories like physical, tangible goods, such as vehicles and real estate, as well as intangible items. The U.S. tax code sections 1231, 1245, 1250, and capital assets primarily cover most of business assets. This article will provide a brief overview of the capital assets.