Publication 15-B Employer'S Tax Guide To Fringe Benefits

Exclusion from wages. You can generally exclude the

is the employee’s dependent or who, if both parents are

value of achievement awards that you give to an employee

deceased, is age 24 or younger.

from the employee’s wages if their cost is not more than

the amount that you can deduct as a business expense for

On-premises facility. The athletic facility must be located

the year. The excludable annual amount is $1,600 ($400

on premises you own or lease. It does not have to be

for awards that are not “qualified plan awards”). See chap-

located on your business premises. However, the exclu-

ter 2 of Pub. 535 for more information on the limit on

sion does not apply to an athletic facility for residential use,

deductions for employee achievement awards.

such as athletic facilities that are part of a resort.

To determine for 2003 whether an achievement

Employee. For this exclusion, treat the following individu-

award is a “qualified plan award” under the de-

als as employees.

duction rules described in Pub. 535, treat any

CAUTION

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employee who received more than $90,000 in pay for 2002

A current employee.

as a highly compensated employee.

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A former employee who retired or left on disability.

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A widow or widower of an individual who died while

If the cost of awards given to an employee is more than

an employee.

your allowable deduction, include in the employee’s wages

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the larger of the following amounts.

A widow or widower of a former employee who re-

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tired or left on disability.

The part of the cost that is more than your allowable

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deduction (up to the value of the awards).

A leased employee who has provided services to

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you on a substantially full-time basis for at least a

The amount by which the value of the awards ex-

year if the services are performed under your pri-

ceeds your allowable deduction.

mary direction or control.

Exclude the remaining value of the awards from the

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A partner who performs services for a partnership.

employee’s wages.

Adoption Assistance

De Minimis (Minimal) Benefits

You can exclude payments or reimbursements you make

You can exclude the value of a de minimis benefit that you

under an adoption assistance program for an employee’s

provide to an employee from the employee’s wages. A de

qualified adoption expenses of up to $10,160 per qualify-

minimis benefit is any property or service that you provide

ing child from the employee’s wages subject to Federal

to an employee and has so little value (taking into account

income tax withholding. However, you cannot exclude

how frequently you provide similar benefits to your employ-

these payments from wages subject to social security,

ees) that accounting for it would be unreasonable or ad-

Medicare, and Federal unemployment (FUTA) taxes. For

ministratively impracticable. Cash, no matter how little, is

more information, see Publication 968, Tax Benefits for

never excludable as a de minimis benefit, except for occa-

Adoption.

sional meal money or transportation fare.

You may exclude $10,160 from an employee’s wages

Examples of de minimis benefits include the following:

for the adoption of a child with special needs regardless of

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Occasional personal use of a company copying ma-

whether the employee has qualified adoption expenses.

chine if you sufficiently control its use so that at least

The determination that an adopted child is qualified as a

85% of its use is for business purposes.

child with special needs must be made by the employee’s

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state.

Holiday gifts, other than cash, with a low fair market

value.

Employee. For this exclusion, do not treat a 2% share-

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holder of an S corporation as an employee of the corpora-

Group-term life insurance payable on the death of an

tion. A 2% shareholder is someone who directly or

employee’s spouse or dependent if the face amount

indirectly owns (at any time during the year) more than 2%

is not more than $2,000.

of the corporation’s stock or stock with more than 2% of the

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Meals. See Meals on page 11.

voting power.

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Occasional parties or picnics for employees and

Form 5500. If you maintain an adoption assistance pro-

their guests.

gram, ERISA may require you to file Form 5500. See the

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Occasional tickets for entertainment or sporting

Instructions for Form 5500.

events.

•

Athletic Facilities

Transportation fare. See Transportation (Commut-

ing) Benefits on page 14.

You can exclude the value of an employee’s use of an

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Occasional typing of personal letters by a company

on-premises gym or other athletic facility that you operate

secretary.

from an employee’s wages if substantially all use of the

facility during the calendar year is by your employees, their

Employee. For this exclusion, treat any recipient of a de

spouses, and their dependent children. For this purpose,

an employee’s dependent child is a child or stepchild who

minimis benefit as an employee.

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Publication 15-B Employer'S Tax Guide To Fringe Benefits - 2003 Page 6

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