Employers often provide employees with special rewards or prizes as a means to boost morale, recognize achievements, acknowledge long-term service, and retain employees. These special perquisites can take on many forms – anything from holiday turkeys to gift cards to allowing employees to take home the employer’s products for free or at a discount. While these small additional benefits may seem like “gifts” from the employer to the employee, what employers sometimes fail to realize is that there are no “gifts” in the employment context, regardless of the employer’s intent. Generally, anything provided to an employee by an employer is includable in the employee’s taxable income unless specifically excluded under the Code. Common exclusions for perquisites to employees include: no-additional-cost services, qualified employee discounts, working condition fringes, and de minimis fringes. All of these exclusions have specific requirements and rules to qualify for the exclusion. For example, for a benefit… Continue Reading
Qualified Transportation Fringe Benefits in the Time of COVID ?Çô IRS Provides an Overview on Treatment of Unused Amounts and Changes to Elections
Prior to the pandemic, many employees used qualified transportation fringe benefits, such as receiving mass transit passes or paying for on-site parking on a pre-tax basis, to help defray the costs of getting to the office. As a result of the pandemic, many workers are working from home, with no need to pay for on-site parking or reap the benefit of employer-provided mass transit passes. The pandemic has also caused some employees to change their mode of transportation, with many deciding to forgo the use of mass transit to drive their own vehicles to work. A recent IRS information letter outlined some options available to employees whose use of qualified transportation has changed throughout the course of the pandemic. Under the example in the information letter, an employee was no longer using mass transit, and so, no longer needed to use compensation deductions to pay for mass transit passes. Instead,… Continue Reading
IRS Proposed Regulations Address the Elimination of the Deduction for Certain Qualified Transportation Fringe Expenses
On June 23, 2020, the IRS released proposed regulations regarding the deduction of certain employer-provided transportation and commuting benefits to reflect changes made to Section 274 of the Internal Revenue Code by the Tax Cuts and Jobs Act (the ?Ç£TCJA?Ç¥). The TCJA eliminated deductions by employers for qualified transportation fringe (?Ç£QTF?Ç¥) expenses for amounts paid or incurred in the taxable years beginning after December 31, 2017. Key issues addressed in the proposed regulations include: (i) the amount of parking expenses that is not deductible when an employer owns or leases the parking facility; (ii) the amount of QTF expenses that is not deductible when an employer pays a third party to provide QTF benefits; (iii) the amount of certain expenses or reimbursements relating to transportation between an employee?ÇÖs residence and place of employment that is not deductible; and (iv) the application of exceptions that may allow certain QTF expenses to… Continue Reading
In Information Letter 2014-17, the IRS reminds employers that the amount that the fair market value of employer-provided parking exceeds the amount (i) paid by the employee for the parking, if any, plus (ii) the amount excludible from income as ?Ç£qualified parking,?Ç¥ is subject to income and employment taxes and withholding. For 2014, the amount excludible for qualified parking is $250 per month. Generally, qualified parking is parking provided by the employer on or near its premises. An employer is considered to provide parking if the employer pays for it (either directly or by reimbursing the employee) or provides it on property owned or leased by the employer. A copy of the Information Letter is available?áhere.