Publication 15-B - Employer'S Tax Guide To Fringe Benefits - 2012 Page 19
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33location is at least 50 miles farther from the employee’s old
Reciprocal agreements. A no-additional-cost service
home than the old job location was. The time test is met if
provided to your employee by an unrelated employer may
the employee works at least 39 weeks during the first 12
qualify as a no-additional-cost service if all the following
months after arriving in the general area of the new job
tests are met.
location.
•
The service is the same type of service generally
For more information on deductible moving expenses,
provided to customers in both the line of business in
see Publication 521, Moving Expenses.
which the employee works and the line of business
in which the service is provided.
Employee. For this exclusion, treat the following individu-
•
You and the employer providing the service have a
als as employees.
written reciprocal agreement under which a group of
•
A current employee.
employees of each employer, all of whom perform
•
substantial services in the same line of business,
A leased employee who has provided services to
may receive no-additional-cost services from the
you on a substantially full-time basis for at least a
other employer.
year if the services are performed under your pri-
mary direction or control.
•
Neither you nor the other employer incurs any sub-
stantial additional cost either in providing the service
Exception for S corporation shareholders. Do not
or because of the written agreement.
treat a 2% shareholder of an S corporation as an employee
of the corporation for this purpose. A 2% shareholder is
Employee. For this exclusion, treat the following individu-
someone who directly or indirectly owns (at any time dur-
als as employees.
ing the year) more than 2% of the corporation’s stock or
stock with more than 2% of the voting power. Treat a 2%
1. A current employee.
shareholder as you would a partner in a partnership for
fringe benefit purposes, but do not treat the benefit as a
2. A former employee who retired or left on disability.
reduction in distributions to the 2% shareholder.
3. A widow or widower of an individual who died while
an employee.
Exclusion from wages. Generally, you can exclude qual-
ifying moving expense reimbursement you provide to an
4. A widow or widower of a former employee who re-
employee from the employee’s wages. If you paid the
tired or left on disability.
reimbursement directly to the employee, report the amount
5. A leased employee who has provided services to you
in box 12 of Form W-2 with the code “P.” Do not report
on a substantially full-time basis for at least a year if
payments to a third party for the employee’s moving ex-
the services are performed under your primary direc-
penses or the value of moving services you provided in
tion or control.
kind.
6. A partner who performs services for a partnership.
No-Additional-Cost Services
Treat services you provide to the spouse or dependent
child of an employee as provided to the employee. For this
This exclusion applies to a service you provide to an
fringe benefit, dependent child means any son, stepson,
employee if it does not cause you to incur any substantial
daughter, or stepdaughter who is a dependent of the em-
additional costs. The service must be offered to customers
ployee, or both of whose parents have died and who has
in the ordinary course of the line of business in which the
not reached age 25. Treat a child of divorced parents as a
employee performs substantial services.
dependent of both parents.
Generally, no-additional-cost services are excess ca-
Treat any use of air transportation by the parent of an
pacity services, such as airline, bus, or train tickets; hotel
employee as use by the employee. This rule does not
rooms; or telephone services provided free or at a reduced
apply to use by the parent of a person considered an
price to employees working in those lines of business.
employee because of item (3) or (4) above.
Substantial additional costs. To determine whether you
Exclusion from wages. You can generally exclude the
incur substantial additional costs to provide a service to an
value of a no-additional-cost service you provide to an
employee, count any lost revenue as a cost. Do not reduce
employee from the employee’s wages.
the costs you incur by any amount the employee pays for
Exception for highly compensated employees. You
the service. You are considered to incur substantial addi-
tional costs if you or your employees spend a substantial
cannot exclude from the wages of a highly compensated
amount of time in providing the service, even if the time
employee the value of a no-additional-cost service that is
spent would otherwise be idle or if the services are pro-
not available on the same terms to one of the following
vided outside normal business hours.
groups.
Publication 15-B (2012)
Page 19
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