Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 14
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24more than 2% of the corporation’s stock or stock with more
5) A leased employee who has provided services to
than 2% of the voting power.
you on a substantially full-time basis for at least a
year if the services are performed under your pri-
Exclusion from wages. You can generally exclude quali-
mary direction or control.
fying moving expense reimbursements you provide to an
6) A partner who performs services for a partnership.
employee from the employee’s wages. If you paid the
reimbursements directly to the employee, report their
Treat services you provide to the spouse or dependent
amount in box 12 of the Form W– 2 with the code P. Do not
child of an employee as provided to the employee. For this
report payments to a third party for the employee’s moving
fringe benefit, “dependent child” means any son, stepson,
expenses or the value of moving services you provide.
daughter, or stepdaughter who is a dependent of the em-
ployee, or both of whose parents have died and who has
not reached age 25. Treat a child of divorced parents as a
No-Additional-Cost Services
dependent of both parents.
Treat any use of air transportation by the parent of an
This exclusion applies to a service you provide to an
employee as use by the employee. This rule does not
employee that does not cause you to incur any substantial
apply to use by the parent of a person considered an
additional costs. The service must be offered to customers
employee because of item (3) above.
in the ordinary course of the line of business in which the
Exclusion from wages. You can generally exclude the
employee performs substantial services.
value of a no-additional-cost service you provide to an
Generally, no-additional-cost services are excess ca-
employee from the employee’s wages.
pacity services, such as airline, bus, or train tickets; hotel
rooms; or telephone services provided free or at a reduced
Exception for highly compensated employees. You
price to employees working in those lines of business.
cannot exclude from the wages of a highly compensated
employee the value of a no-additional-cost service that is
Substantial additional costs. To determine whether you
not available on the same terms to one of the following
incur substantial additional costs to provide a service to an
groups.
employee, count any lost revenue as a cost. Do not reduce
the costs you incur by any amount the employee pays for
1) All your employees, or
the service. You are considered to incur substantial addi-
tional costs if you or your employees spend a substantial
2) A group of employees defined under a reasonable
amount of time in providing the service, even if the time
classification you set up that does not favor highly
spent would otherwise be “idle” or if the services are
compensated employees.
provided outside normal business hours.
For this exclusion, a highly compensated employee for
2002 is an employee who meets either of the following
Reciprocal agreements. A no-additional-cost service
tests.
provided to your employee by an unrelated employer may
qualify as a no-additional-cost service if all the following
1) The employee was a 5% owner at any time during
tests apply:
the year or the preceding year.
1) The service is the same type of service generally
2) The employee received more than $90,000 in pay for
provided to customers in both the line of business in
the preceding year.
which the employee works and the line of business
You can choose to ignore test (2) if the employee was not
in which the service is provided.
also in the top 20% of employees when ranked by pay for
2) You and the employer providing the service have a
the preceding year.
written reciprocal agreement under which a group of
employees of each employer, all of whom perform
substantial services in the same line of business,
Retirement Planning Services
may receive no-additional-cost services from the
other employer.
You may exclude from wages the value of any retirement
3) Neither you nor the other employer incurs any sub-
planning advice or information provided to your employee
stantial additional cost either in providing the service
or his or her spouse if you maintain a qualified retirement
or because of the written agreement.
plan. The advice and information may concern retirement
generally, and not only the employer plan. However, the
Employee. For this exclusion, treat the following Individu-
exclusion does not apply to services for tax preparation,
als as employees.
accounting, legal, or brokerage services.
1) A current employee.
Transportation (Commuting)
2) A former employee who retired or left on disability.
3) A widow or widower of an individual who died while
Benefits
an employee.
4) A widow or widower of a former employee who re-
This section discusses exclusion rules that apply to bene-
tired or left on disability.
fits you provide your employees for their personal transpor-
Page 14
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