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

Table 2-1. Special Rules for Various Types of Fringe Benefits

(For more information, see the full discussion in this section.)

Treatment Under Employment Taxes

Type of Fringe Benefit

Income Tax Withholding

Social Security and Medicare

Federal Unemployment (FUTA)

Exempt

, except for long-term care

Exempt, except for certain payments

Exempt

1,2

Accident and health benefits

benefits provided through a flexible

to S corporation employees who are

spending or similar arrangement.

2% shareholders.

Achievement awards

Exempt

up to $1,600 for qualified plan awards ($400 for nonqualified awards).

Adoption assistance

Exempt

Taxable

1,3

Exempt if substantially all use during the calendar year is by employees, their spouses, and their dependent children

Athletic facilities

and the facility is operated by the employer on premises owned or leased by the employer.

De minimis (minimal) benefits

Exempt

Dependent care assistance

Exempt

up to certain limits, $5,000 ($2,500 for married employee filing separate return).

Educational assistance

Exempt up to $5,250 of benefits each year. (See

Educational

Assistance, later in this section.)

Employee discounts

Exempt

up to certain limits. (See

Employee

Discounts, later in this section.)

Employee stock options

See

Employee Stock

Options, later in this section.

Employer-provided cell phones

Exempt if provided primarily for noncompensatory business purposes.

Exempt

1,4, 7

up to cost of $50,000 of

Exempt

Group-term life insurance coverage

coverage. (Special rules apply to

former employees.)

Health savings accounts (HSAs)

Exempt for qualified individuals up to the HSA contribution limits. (See

Health Savings

Accounts, later in this section.)

Lodging on your business premises

Exempt

if furnished for your convenience as a condition of employment.

Exempt if furnished on your business premises for your convenience.

Meals

Exempt if de minimis.

Moving expense reimbursements

Exempt

if expenses would be deductible if the employee had paid them.

No-additional-cost services

Exempt

Retirement planning services

Exempt

up to certain limits if for rides in a commuter highway vehicle and/or transit passes ($125), qualified parking

($240), or qualified bicycle commuting reimbursement

($20). (See

Transportation (Commuting)

Benefits, later in this

section.)

Transportation (commuting) benefits

Exempt if de minimis.

Tuition reduction

Exempt

if for undergraduate education (or graduate education if the employee performs teaching or research

activities).

Working condition benefits

Exempt

Exemption does not apply to S corporation employees who are 2% shareholders.

Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees.

Exemption does not apply to certain highly compensated employees under a program that favors those employees.

Exemption does not apply to certain key employees under a plan that favors those employees.

Exemption does not apply to services for tax preparation, accounting, legal, or brokerage services.

If the employee receives a qualified bicycle commuting reimbursement in a qualified bicycle commuting month, the employee cannot receive commuter highway vehicle, transit

pass, or qualified parking benefits in that same month.

You must include in your employee’s wages the cost of group-term life insurance beyond $50,000 worth of coverage, reduced by the amount the employee paid toward the

insurance. Report it as wages in boxes 1, 3, and 5 of the employee’s Form W-2. Also, show it in box 12 with code “C.” The amount is subject to social security and Medicare taxes,

and you may, at your option, withhold federal income tax.

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Publication 15-B (2012)