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Taxable Employee Fringe Benefits

Attention Business owners! Now is the perfect time to look at the fringe
benefits you provide to your employees. This specific area is a main
focus of the IRS right now.

In general, anything you give to your employees is taxable unless the
IRS specifically exempts it. Since that may not be as clear as you want,
let’s give some examples. Certainly this is not an all inclusive list,
however it will provide a good starting point. Cash and cash equivalents
are always taxable. An example would be a $50 gift card you give to the
employee of the month. This is taxable at the time that they are given
to the employee and in the pay period they are received.

Some items are exempt from taxation. Cell phones, if used primarily for
business, can be excluded from income. Additionally most health care
plans are exempt and, if the health care plan is Section 125 Cafeteria
Plan applicable, that benefit is exempt from FICA tax.

Company cars become a little bit trickier and have a few calculation
methods; standard mileage or the lease valuation rule. Moving expenses
paid under an accountable plan, are also exempt. An item that is not
exempt, however, is house hunting. This includes travel to the new
location prior to moving. This fringe benefit is taxable.

Remember, the IRS is watching so now is an excellent time to review your
procedures and controls to ensure proper timing and taxation of fringe
benefits.