What are fringe benefits?Many small business employers offer fringe benefits as an addition to salary, and many of these are exempt from taxation if certain rules and conditions are followed. Examples of fringe benefits offered to employees by small business owners include insurance, reimbursement for education, various discounts, and other programs that fall under the fringe benefit rules. These fringe benefits are attractive to potential job candidates as they begin their search for an ideal job position.
What are common examples of fringe benefits?Job seekers are now exploring the possibility of choosing a position with a company that offers the most benefits to them aside from salary. Fringe benefits often come in benefit packages, which may include various types of insurance including medical, dental, disability and life, as well as paid time off (PTO) which may be paid sick days, holidays, and accrued vacation time.
Additional fringe benefits now offered by many small business owners include retirement plans, child care services or reimbursement, education reimbursement, maternity leave, cafeteria plan, discounts for local services, bank or credit union benefits, flexible work schedules, and more. Some businesses also allow the employee to use their company vehicles or equipment for personal use as part of their enticing fringe benefit package.
What is the tax treatment of fringe benefits?The term "fringe benefit" may seem self-explanatory to the general observer, but the Internal Revenue Code also includes their own set of rules in regards to tax treatment of each individual benefit.
The IRS has specific requirements and conditions for fringe benefits to be tax exempt; however some benefits may also be partially non-taxable even if they are not fully exempt.
What are common examples of fringe benefits?Job seekers are now exploring the possibility of choosing a position with a company that offers the most benefits to them aside from salary. Fringe benefits often come in benefit packages, which may include various types of insurance including medical, dental, disability and life, as well as paid time off (PTO) which may be paid sick days, holidays, and accrued vacation time.
Additional fringe benefits now offered by many small business owners include retirement plans, child care services or reimbursement, education reimbursement, maternity leave, cafeteria plan, discounts for local services, bank or credit union benefits, flexible work schedules, and more. Some businesses also allow the employee to use their company vehicles or equipment for personal use as part of their enticing fringe benefit package.
What is the tax treatment of fringe benefits?The term "fringe benefit" may seem self-explanatory to the general observer, but the Internal Revenue Code also includes their own set of rules in regards to tax treatment of each individual benefit.
The IRS has specific requirements and conditions for fringe benefits to be tax exempt; however some benefits may also be partially non-taxable even if they are not fully exempt.
- Income Taxes on Benefits- Aside from the fringe benefits that are considered excluded from tax, some benefits will be taxable and included as part of compensation. These benefits are typically reported on the W-2 form. Some special rules apply to the income tax of fringe benefits for withholding, depositing, and reporting the employment tax of these benefits. The IRS provides a detailed guide on the types and tax treatment of fringe benefits in their Taxable Fringe Benefits Guide.
- Benefits Excluded from Tax - Some fringe benefits are commonly considered to be excluded from tax and therefore become non-taxable benefits. Some exclusions typically include assistance for adoption, childcare, education, or dependant care, achievement awards, health care insurance, group term life insurance, reimbursements for moving expenses, retirement planning, transportation benefits, and working condition benefits.
While some fringe benefits are not excluded from tax, they still provide employees with the advantage of receiving benefits that go beyond their normal salary and bonuses. In light of some preferential tax treatment and favorable view by job seekers, it's worthwhile for the small business owner to consider offering fringe benefits.
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