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Know Which Fringe Benefits Are Reportable for the Holidays [eBook]

Which employee gifts and fringe benefits count as taxable income? This guide will help you out.

The letter "J" for Justworks.
Justworks
Sep 23, 20214 minutes
Know which fringe benefits are reportable.

It’s that time again — the end of the year, when annual tax forms, employee gifts, and holiday celebrations all blur together. While this year has certainly seen its share of new challenges, you can still count on having to account for the same fringe benefits that you do every year. If you’re new to the concept of reportable fringe benefits, or you’re just looking for a refresher, our eBook’s got you covered.

The Ins and Outs of Fringe Benefits

Clear up any confusion around fringe benefits.

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Plan Ahead for End of Year

As you approach the last few weeks of the year, there’s no shortage of tasks to prepare for the new year ahead. While it’s generally a good idea to prepare for things ahead of time, it’s especially pertinent advice when it comes to end-of-year tasks for employers. Between organizing and scheduling payments, helping employees max out their 401(k), or trying to close the books, employers have more than enough to juggle.

If you’re unfamiliar with the end-of-year tasks you’ll be undertaking, it could be that much harder to get started when you’re already in the last — and busiest — weeks of the year. If you start becoming more familiar with the things you’ll need to tackle before you have to tackle them, you’ll set yourself up for a much more smooth end-of-year process.

Some end-of-year tasks might also have strict guidelines you’ll need to consider. For example, if you uncover an error in your final payroll for the previous year, and you’re already a few days into the new year, you won’t be able to correct the error. The Internal Revenue Service (IRS) has strict guidelines around opening up tax filings from the previous year, so it’s incredibly important to take the time to double-check for any errors. And if you give yourself the time to start the process early, you’ll also give yourself the chance to better understand the process — which means less frustration and more confidence!

Recognize Your Employees' Performance

Do you want to instill some of that same confidence in your employees? Recognizing their performance can help do that. The last few weeks of the month are also a good time to start thinking about employee gifts. Gifts are a great year-end reward — and even better if your employees don’t have to pay considerable income taxes on them.

And according to a study conducted by Gallup, employee engagement increased by 32% for employees who felt recognized for their performance. If you can increase engagement and recognize your employees for their performance, that sounds like a win-win. And the fun part? There are so many creative alternatives to cash for end-of-year gifts.

Learn the Ins and Outs of Fringe Benefits

When it comes to fringe benefits — which are defined as extra benefits that supplement an employee’s salary — those creative end-of-year rewards could be classified as such. But how do you know which employee rewards are taxable? This eBook discusses the ins and outs of fringe benefits, including:

  • The definition of fringe benefits - understand the IRS definition of a fringe benefit with a deeper explanation.

  • The tax rules around fringe benefits - learn which fringe benefits are taxable and what the exceptions are.

  • Tax deduction eligibility - find out how non-employees, like an employer, may be eligible for fringe benefit tax deductions. This includes employees who own stock in an S-Corporation, Highly Compensated Employees (HCEs), and key employees who own parts of the business.

  • Fringe benefits examples - learn the 28 fringe benefits that can be excluded from income tax, along with more detailed descriptions of which exemptions apply.

For example, did you know that adoption assistance, achievement awards, and work-related education assistance may be excluded from taxable income? You can learn about the other excluded fringe benefits by downloading the book here.

Report Fringe Benefits Throughout the Year

While end-of-year gifts are common fringe benefits, employers may provide other types of fringe benefits throughout the calendar year. Because end-of-year gifts are provided toward the end of the year, it makes sense to report them close to (but before) the end of the year they’re provided. But for many fringe benefits that are provided to employees earlier in the year, the IRS recommends they be reported as they’re given to ensure they’re taxed correctly. Plus, you’ll have one less task to stress about when the end of the year rolls around.

If you’re looking for more information on fringe benefits, you can check out Fringe Benefits 101, which includes a roundup of articles on the difference between a benefit and a perk, employee perks that help attract talent, incentives that improve workplace performance, and steps for starting an employee recognition program at your business.

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.