Fringe Benefits Training Courses

What Are Fringe Benefits: Info And Training Options

Fringe benefits - often called "perks" - are a form of compensation for services beyond the employee's normal rate of pay.

Examples of fringe benefits include health insurance, use of a company car, childcare reimbursement, housing allowance, educational assistance, vacation pay, sick pay, employee discounts, gym memberships, stock options, and transportation benefits. Essentially, any benefit other than salary than an organization provides its employees is a fringe benefit. Generally speaking, fringe benefits are taxable.

To What Taxes Are Fringe Benefits Subject? What Is The Tax Rate On Fringe Benefits?

Fringe benefits are subject to income tax withholding and employment taxes, and are generally included in an employee's gross income. Taxable fringe benefits must be included as income on the employee's W-2.

What Are Examples Of Taxable Fringe Benefits?

Common examples of taxable fringe benefits include bonuses, vacation expenses, transit passes, boarding, lodging, rent-free or low-rent housing, use of a company vehicle for non-work related purposes, group-term life insurance in excess of $50,000, and gym memberships paid for or subsidized by employers. Employees have to pay income tax at their usual rate for these benefits.

Which Fringe Benefits Are Tax-Free?

Tax qualified benefits are totally free of federal and state income taxes, as well as Social Security, Medicare, and FUTA taxes.

Non-taxable fringe benefits include health insurance, medical expense reimbursements, health flexible spending accounts, dental insurance, education assistance, retirement planning services, job-related tuition assistance reimbursements, and day care assistance.

For more on fringe benefits, either read our "About Administering And Taxing Fringe Benefits" information below, or order our recommended training course.

Recommended Fringe Benefit Training Courses

Featured Course: Compliance Tips For Gifts, Awards, & Other Fringe Benefits

This 90-minute training session will help you to determine if your fringe benefits are currently being offered to employees correctly in order to ensure that they are compliant with federal and state payroll tax regulations. This may assist you in avoiding a costly audit in the future.

We'll cover the IRS guidelines for the items that they will focus on when an employment tax audit is being performed, as well as tips on how to perform your own internal review to catch anything that may actually cause an audit.

fringe benefit trainingLearning Objectives:
  • What are fringe benefits
  • Which fringe benefits are taxable - and how they should be reported
  • Which benefits are excludable from taxes - and how they should be documented
  • How to compute the value of a "good" versus a "service" - and how to handle the payroll tax consequences for those items considered taxable
  • How to perform your own internal review to catch anything that may actually cause an audit
  • What the IRS guidelines are for an employment tax audit
  • What to do if you have some items that should have been considered wages subject to payroll taxation
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About Administering And Taxing Fringe Benefits

What Are Fringe Benefits?

Fringe benefits are compensations made to an employee beyond the regular benefit of being paid for their work.

Fringe benefits commonly include health insurance, group term life coverage, education reimbursement, childcare and assistance reimbursement, cafeteria plans, sick time, vacation time, employee discounts, tuition assistance, personal use of a company owned vehicle, and other similar benefits.

Key executives in large organizations also might receive fringe benefits such as the use of time-share condominiums, use of a company jet, discounted or free health club memberships, and more.

How To Calculate Fringe Benefits

The fringe benefit value is calculated as a percentage of the determined value. Re how to calculate fringe benefits: the rate is calculated by adding together the annual cost of all benefits and payroll taxes paid, and dividing by the annual wages paid. For instance, if the total benefits paid were $50,000 and the wages paid were $200,000, then the fringe benefit rate would be 25%

How The Fringe Benefits Tax Works

Fringe benefits taxes are paid by employers on certain benefits they provide to their employees, their employees' family, or other associates. The benefits are subject to income tax withholding and employment taxes.

There is no taxation to employees on fringe benefits if the employee uses the benefit 100% for work. However, the value of any personal use of a fringe benefit must be included in the employee's compensation, and the employee must pay tax on it. The employee also must meet any documentation requirements that apply to the deduction.

How To Handle Fringe Benefits On Payroll And Paychecks

Most Fringe Benefits are not subject to income tax because they are either specifically excluded by law, or paid for by the employee. Fringe benefits such as gifts or bonuses, and certain types of retirement and insurance benefits, are considered taxable income, however, and any employee who receives taxable fringe benefits will have to include the fair market value of the benefit in their taxable income for the year, which will be subject to tax withholdings and social security benefits payments.

Many employers customize fringe benefits to specific employees' lifestyles whereby workers can select certain benefits from a cafeteria-style plan. Employees should be aware of what benefits specifically qualify for a fringe benefit tax so they can prepare accordingly.
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