Publication 15 B - Employer'S Tax Guide To Fringe Benefits - 2002 Page 8
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24Form 5500. Generally, if you maintain an educational
1) The program benefits employees who qualify under
assistance program, you must report information about the
rules set up by you that do not favor highly compen-
program each year by the last day of the 7th month after
sated employees. To determine whether your pro-
the program year ends. Use Form 5500 and Schedule F
gram meets this test, do not consider employees
(Form 5500). However, if the education assistance pro-
excluded from your program who are covered by a
gram provides only job-related training that is deductible by
collective bargaining agreement if there is evidence
the employee as an ordinary and necessary business
that educational assistance was a subject of
expense, you are not required to file Form 5500. See the
good-faith bargaining.
form instructions for information on extensions of time to
file.
2) The program does not provide more than 5% of its
benefits during the year for shareholders or owners.
A shareholder or owner is someone who owns (on
Employee Discounts
any day of the year) more than 5% of the stock or of
the capital or profits interest of your business.
This exclusion applies to a price reduction you give an
3) The program does not allow employees to choose to
employee on property or services you offer to customers in
receive cash or other benefits that must be included
the ordinary course of the line of business in which the
in gross income instead of educational assistance.
employee performs substantial services. However, it does
4) You give reasonable notice of the program to eligible
not apply to discounts on real property or discounts on
employees.
personal property of a kind commonly held for investment
(such as stocks or bonds).
Your program can cover former employees if their employ-
ment is the reason for the coverage.
Employee. For this exclusion, treat the following individu-
For this exclusion, a highly compensated employee for
als as employees.
2002 is an employee who meets either of the following
tests.
1) A current employee.
2) A former employee who retired or left on disability.
1) The employee was a 5% owner at any time during
the year or the preceding year.
3) A widow or widower of an individual who died while
an employee.
2) The employee received more than $90,000 in pay for
the preceding year.
4) A widow or widower of an employee who retired or
left on disability.
You can choose to ignore test (2) if the employee was not
also in the top 20% of employees when ranked by pay for
5) A leased employee who has provided services to
the preceding year.
you on a substantially full-time basis for at least a
year if the services are performed under your pri-
Employee. For this exclusion, treat the following individu-
mary direction or control.
als as employees.
6) A partner who performs services for a partnership.
1) A current employee.
2) A former employee who retired, left on disability, or
Exclusion from wages. You can generally exclude the
was laid off.
value of an employee discount you provide to an employee
from the employee’s wages, up to the following limits.
3) A leased employee who has provided services to
you on a substantially full-time basis for at least a
1) For a discount on services, 20% of the price you
year if the services are performed under your pri-
charge nonemployee customers for the service.
mary direction or control.
2) For a discount on merchandise or other property,
4) Yourself (if you are a sole proprietor).
your gross profit percentage times the price you
charge nonemployee customers for the property.
5) A partner who performs services for a partnership.
Determine your gross profit percentage based on all
Exclusion from wages. You can exclude up to $5,250 of
property you offer to customers (including employee cus-
educational assistance you provide to an employee under
tomers) and your experience during the tax year immedi-
an educational assistance program from the employee’s
ately before the tax year in which the discount is available.
wages each year.
To figure your gross profit percentage, subtract the total
cost of the property from the total sales price of the prop-
Assistance over $5,250. If you do not have an educa-
erty and divide the result by the total sales price of the
tional assistance plan, or you provide an employee with
property.
assistance exceeding $5,250, you can exclude the value
of these benefits from wages if they are working condition
Exception for highly compensated employees. You
benefits. Property or a service provided is a working condi-
cannot exclude from the wages of a highly compensated
tion benefit to the extent that if the employee paid for it, the
employee any part of the value of a discount that is not
amount paid would have been deductible as a business or
available on the same terms to one of the following groups.
depreciation expense. See Working Condition Benefits,
later.
1) All your employees, or
Page 8
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