Publication 15-B - Employer'S Tax Guide To Fringe Benefits - 2012 Page 29
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Is within a classification for which you actually pay,
Transfer of property. The above choice for reporting
or have specified in writing that you will pay, over-
and withholding does not apply to a fringe benefit that is a
time pay of at least one and one-half times the regu-
transfer of tangible or intangible personal property of a kind
lar rate provided in section 207 of FLSA; and
normally held for investment or a transfer of real property.
For this kind of fringe benefit, you must use the actual date
•
Received pay of not more than $115,000 during
the property was transferred to the employee.
2011.
Withholding and depositing taxes. You can add the
However, an employee is not considered a qualified em-
value of fringe benefits to regular wages for a payroll
ployee if you do not comply with the recordkeeping require-
period and figure income tax withholding on the total. Or
ments concerning the employee’s wages, hours, and other
you can withhold federal income tax on the value of fringe
conditions and practices of employment under section
benefits at the flat 25% rate that applies to supplemental
211(c) of FLSA and the related regulations.
wages. See section 7 in Publication 15 (Circular E) for the
flat rate (35%) when supplemental wage payments to an
Unsafe conditions. Unsafe conditions exist if, under the
individual exceed $1 million during the year.
facts and circumstances, a reasonable person would con-
You must withhold the applicable income, social secur-
sider it unsafe for the employee to walk or use public
ity, and Medicare taxes on the date or dates you chose to
transportation at the time of day the employee must com-
treat the benefits as paid. Deposit the amounts withheld as
mute. One factor indicating whether it is unsafe is the
discussed in section 11 of Publication 15 (Circular E).
history of crime in the geographic area surrounding the
employee’s workplace or home at the time of day the
Amount of deposit. To estimate the amount of income
employee commutes.
tax withholding and employment taxes and to deposit them
on time, make a reasonable estimate of the value of the
fringe benefits provided on the date or dates you chose to
4. Rules for Withholding,
treat the benefits as paid. Determine the estimated deposit
by figuring the amount you would have had to deposit if you
Depositing, and Reporting
had paid cash wages equal to the estimated value of the
fringe benefits and withheld taxes from those cash wages.
Use the following guidelines for withholding, depositing,
Even if you do not know which employee will receive the
and reporting taxable noncash fringe benefits. For addi-
fringe benefit on the date the deposit is due, you should
tional information on how to withhold on fringe benefits,
follow this procedure.
see Publication 15 (Circular E), section 5.
If you underestimate the value of the fringe benefits and
deposit less than the amount you would have had to
Valuation of fringe benefits. Generally, you must deter-
deposit if the applicable taxes had been withheld, you may
mine the value of noncash fringe benefits no later than
be subject to a penalty.
January 31 of the next year. Before January 31, you may
If you overestimate the value of the fringe benefit and
reasonably estimate the value of the fringe benefits for
overdeposit, you can either claim a refund or have the
purposes of withholding and depositing on time.
overpayment applied to your next Form 941. See the
Choice of period for withholding, depositing, and re-
Instructions for Form 941.
porting. For employment tax and withholding purposes,
If you paid the required amount of taxes but withheld a
you can treat fringe benefits (including personal use of
lesser amount from the employee, you can recover from
employer-provided highway motor vehicles) as paid on a
the employee the social security, Medicare, or income
pay period, quarter, semiannual, annual, or other basis.
taxes you deposited on the employee’s behalf and in-
But the benefits must be treated as paid no less frequently
cluded on the employee’s Form W-2. However, you must
than annually. You do not have to choose the same period
recover the income taxes before April 1 of the following
for all employees. You can withhold more frequently for
year.
some employees than for others.
You can change the period as often as you like as long
Paying your employee’s share of social security and
as you treat all of the benefits provided in a calendar year
Medicare taxes. If you choose to pay your employee’s
as paid no later than December 31 of the calendar year.
social security and Medicare taxes on taxable fringe bene-
You can also treat the value of a single fringe benefit as
fits without deducting them from his or her pay, you must
paid on one or more dates in the same calendar year, even
include the amount of the payments in the employee’s
if the employee receives the entire benefit at one time. For
income. Also, if your employee leaves your employment
example, if your employee receives a fringe benefit valued
and you have unpaid and uncollected taxes for noncash
at $1,000 in one pay period during 2012, you can treat it as
benefits, you are still liable for those taxes. You must add
made in four payments of $250, each in a different pay
the uncollected employee share of social security and
period of 2012. You do not have to notify the IRS of the use
Medicare tax to the employee’s wages. Follow the proce-
dure discussed under Employee’s Portion of Taxes Paid
of the periods discussed above.
Publication 15-B (2012)
Page 29
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