Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 6
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24cussed in chapter 2 of Publication 535, Business Ex-
adoption expenses. The determination that an adopted
penses.
child is qualified as a child with special needs must be
made by the employee’s state.
Employee. For this exclusion, treat the following individu-
Employee. For this exclusion, do not treat a 2% share-
als as employees.
holder of an S corporation as an employee of the corpora-
tion. A 2% shareholder is someone who directly or
1) A current employee.
indirectly owns (at any time during the year) more than 2%
2) A former common-law employee that you maintain
of the corporation’s stock or stock with more than 2% of the
coverage for in consideration of or based on an
voting power.
agreement relating to prior service as an employee.
3) A leased employee who has provided services to
Athletic Facilities
you on a substantially full-time basis for at least a
year if the services are performed under your pri-
mary direction or control.
You can exclude the value of an employee’s use of an
on-premises gym or other athletic facility you operate from
Exception for S corporation shareholders. Do not
the employee’s wages if substantially all use of the facility
treat a 2% shareholder of an S corporation as an employee
during the calendar year is by your employees, their
of the corporation. A 2% shareholder is someone who
spouses, and their dependent children. For this purpose,
directly or indirectly owns (at any time during the year)
an employee’s dependent child is a child or stepchild who
more than 2% of the corporation’s stock or stock with more
is the employee’s dependent or who, if both parents are
than 2% of the voting power.
deceased, is age 24 or younger.
On-premises facility. The athletic facility must be located
Exclusion from wages. You can generally exclude the
on premises you own or lease. It does not have to be
value of achievement awards you give to an employee
located on your business premises. However, the exclu-
from the employee’s wages if their cost is not more than
sion does not apply to an athletic facility for residential use,
the amount you can deduct as a business expense for the
such as athletic facilities that are part of a resort.
year. That amount is $1,600 ($400 for awards that are not
“qualified plan awards”). See chapter 2 of Publication 535
Employee. For this exclusion, treat the following individu-
for more information on the limit on deductions for em-
als as employees.
ployee achievement awards.
1) A current employee.
To determine for 2002 whether an achievement
!
award is a “qualified plan award” under the de-
2) A former employee who retired or left on disability.
duction rules described in Pub. 535, treat any
CAUTION
3) A widow or widower of an individual who died while
employee who received more than $90,000 in pay for 2001
an employee.
as a highly compensated employee.
4) A widow or widower of a former employee who re-
tired or left on disability.
If the cost of awards given to an employee is more than
your allowable deduction, include in the employee’s wages
5) A leased employee who has provided services to
the larger of the following amounts.
you on a substantially full-time basis for at least a
year if the services are performed under your pri-
•
The part of the cost that is more than your allowable
mary direction or control.
deduction (up to the value of the awards).
•
6) A partner who performs services for a partnership.
The amount by which the value of the awards ex-
ceeds your allowable deduction.
You exclude the remaining value of the awards from the
De Minimis (Minimal) Benefits
employee’s wages.
You can exclude the value of a de minimis benefit you
provide to an employee from the employee’s wages. A de
Adoption Assistance
minimis benefit is any property or service you provide to an
employee that has so little value (taking into account how
You can exclude payments or reimbursements you make
frequently you provide similar benefits to your employees)
under an adoption assistance program for an employee’s
that accounting for it would be unreasonable or administra-
qualified adoption expenses of up to $10,000 per qualify-
tively impracticable. Cash, no matter how little, is never
ing child from the employee’s wages subject to federal
excludable as a de minimis benefit, except for occasional
income tax withholding. However, you cannot exclude
meal money or transportation fare.
these payments from wages subject to social security,
Examples of de minimis benefits include the following:
Medicare, and federal unemployment taxes. For more in-
•
formation, see Publication 968, Tax Benefits for Adoption.
Copying machine use. Occasional personal use of
Beginning in 2003, you may exclude $10,000 from an
a company copying machine, if you sufficiently con-
employee’s wages for the adoption of a child with special
trol its use so that at least 85% of its use is for
needs regardless of whether the employee has qualified
business purposes, is a de minimis benefit.
Page 6
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