Businesses often provide fringe benefits and other ‘perks’ to their employees in order to create a more comfortable workplace, increase overall productivity, and facilitate greater efficiencies. Employers should understand the potential tax implications of these fringe benefits both to the company providing the fringe benefits and to the employees who receive them.
The tax rules relating to fringe benefits can be tricky to navigate and mistakes may be particularly difficult to address because they could affect the personal tax liabilities of employees. In addition, as we near the end of the year, time may be running out to determine if a particular fringe is taxable and, if so, the fair market value of taxable non-cash fringe benefits that must be reported on an employee’s Form W-2. While general reporting rules mandate that the value of the taxable fringe benefits provided in a calendar year must be reported by January 31 of the following year, a special accounting rule may be available as an alternative for certain taxable fringe benefits provided to employees at the end of a calendar year.
Following are the top five issues that we have identified that may be relevant to employers and their employees:
- Company aircraft use for personal travel
- Spousal accompaniment on business trips
- Employees’ travel away from home for work
- Trips awarded to employees for attaining performance goals
- Company-provided cell phones and tablet devices.