- Excessive mileage reimbursements: Payments to an employee for business-related driving in his or her own car that exceed the IRS standard mileage rate are taxable income.
2. Moving expenses: In the past, employees who moved over 50 miles for their current job (not a new job) could receive tax-free reimbursement from their employer for their moving expenses. The Tax Cuts and Jobs Act made this fringe benefit taxable for 2018 – 2025. Reimbursement of expenses for employee moves of less than 50 miles have always been taxable.
3. Bicycle commuting: Until 2018, employers could also provide up to $20 per month to employees who commuted to work by bicycle. The Tax Cuts and Jobs Act makes this benefit taxable to employees during 2018 through 2025.
4. Clothing: Clothing given to employees that is suitable for street wear is a taxable fringe benefit.
Excessive education reimbursements. Payments for educational assistance that is not job related or that exceed the allowable IRS exclusion are taxable.
5. Awards and Prizes: Cash awards are taxable unless given to charity. Non-cash awards are taxable unless nominal in value or given to charity.
6. Expense reimbursements without adequate accounting: An employee must provide an adequate accounting for any expense reimbursement, or it will be taxable income.
7. Working condition fringes: A working condition fringe benefit is tax free to an employee to the extent they can deduct the cost of the property or services as a business or depreciation expense. Only if he or she had paid for it. If the employee uses the benefit 100% for work, it is tax free. But the value of any personal use of a working condition fringe benefit must be included in the employee’s compensation. And, he or she must pay tax on it. The employee must meet any documentation requirements that apply to the deduction. The value of the personal use is determined according to the benefit’s fair market value.
8. Company car: If an employee uses a company car part of the time for personal driving, the value of the personal use must be included in the employee’s income. The employer determines how to value the use of a car, and there are several methods that may be used. The most common is for the employer to report a percentage of the car’s annual lease value as determined by IRS tables.
Menu
