Overview
The Internal Revenue Service (IRS) publishes a document (Publication 15-B) to provide information for employers on the employment tax treatment of fringe benefits. Fringe benefits are defined as a form of pay for the performance of services. For employees, the value of any taxable fringe benefit is subject to employment taxes and must be reported on Form W-2. For non-employees, the value of benefits may need to be reported on Form 1099-MISC. Any fringe benefit an employer provides is taxable and must be included in the recipient’s pay unless the law specifically excludes it. Section 2 of Publication 15-B discusses the exclusion rules for certain fringe benefits.
Use of Personal Vehicles
One potential fringe benefit that is common among organizations is the use of personal or employer-provided vehicles. The following are some considerations you should be aware of regarding the use of personal vehicles as a fringe benefit.
Cents per mile rule – The business mileage rate for 2016 is 54 cents per mile. This rate may be used to reimburse an employee for business use of a personal vehicle. It may also be used to value the personal use of a vehicle you provide to an employee, under certain circumstances.
Transportation Benefits
Employers can exclude from employee wages the following:
- De Minimis transportation benefits – any local transportation benefit you provide to an employee if it has so little value that accounting for it would be unreasonable or administratively impracticable (taking into account how frequently you provide transportation to your employees) and;
- Qualified transportation benefits – This exclusion applies to the following benefits: a ride in a commuter highway vehicle between the employee’s home and work place; a transit pass; qualified parking; and qualified bicycle commuting reimbursement. You can generally exclude the value of transportation benefits that you provide to an employee during 2016 from the employee’s wages up to $255 per month for combined commuter highway vehicle transportation and transit passes and up to $255 per month for qualified parking.
The rules concerning fringe benefits are voluminous, and you should be sure you understand the impact that providing fringe benefits may have on your organization. You should also understand the rules for withholding, depositing and reporting of fringe benefits that are outlined in Publication 15-B to ensure that you comply fully with the IRS regulations.
Please note that the above article is not meant to replace the full IRS Publication on providing comprehensive guidance with fringe benefits. Stay tuned for additional blog topics on this subject. Have questions on this subject? Contact bdittmer@md-cpas.com.