Fringe benefits

Fringe benefits: concept and Fringe benefits: concept and tax consequencestax consequences

Gulbanu DuisenbekovaGulbanu Duisenbekova

Aigul Kalikhanova Aigul Kalikhanova

A fringe benefit is a form of pay (including property, services, cash or

cash equivalent) in addition to stated pay for the

performance of services.

Fringe benefit examplesFringe benefit examples

an employer-provided an employer-provided vehiclevehicle

group health group health insurance insurance 

Employee discounts Employee discounts

Why do employers offer fringe Why do employers offer fringe benefits?benefits?

Group health plansGroup health plans

Employee receiving Employee receiving benefitsbenefits

Fringe benefits could be :Fringe benefits could be :

TaxableTaxable

Nontaxable (excludable)Nontaxable (excludable)

Partially taxable Partially taxable

Tax-deferredTax-deferred

Classification of fringe benefitsClassification of fringe benefits

For Employment Security For Employment Security

For Health ProtectionFor Health Protection

For Old Age and RetirementFor Old Age and Retirement

For Personnel Identification, Participation For Personnel Identification, Participation and Stimulationand Stimulation

Fringe benefits are categorized Fringe benefits are categorized asas

Payment for Time Not workedPayment for Time Not worked

Extra Pay for time WorkedExtra Pay for time Worked

CalculationCalculation

Calculating fringe benefit taxCalculating fringe benefit tax

- Single rate (formerly Flat Rate)- Single rate (formerly Flat Rate)

- Alternate rate (formerly multi-rate ) - Alternate rate (formerly multi-rate )

- Rates of fringe benefit tax - Rates of fringe benefit tax

ReportReportinging of of Taxable Fringe Taxable Fringe Benefits Benefits

Fringe benefits>$ Fringe benefits>$ 20002000

Reportable fringe Reportable fringe benefitsbenefits

Included on employees Included on employees payment summarypayment summary

Shown on employees Shown on employees tax returntax return

Tax consequencesTax consequences

RetirementRetirement

Employee’s compensation employees’ taxable Employee’s compensation employees’ taxable income income

Group term life insuranceGroup term life insurance

Provided by employersProvided by employers

Additional taxes Additional taxes deducted from deducted from employee’s employee’s paychecks =>paychecks =>

Additional incomeAdditional income

Tax consequences in Business Tax consequences in Business

Unsubstantiated Business ExpensesUnsubstantiated Business Expenses

Reimbursement may have unexpected tax Reimbursement may have unexpected tax consequencesconsequences..Moving Expense ReimbursementMoving Expense Reimbursement

expenses may be deductible yet excluded from expenses may be deductible yet excluded from wages in certain situationswages in certain situations

E.g: E.g:

-Employer consequences: The moving expenses -Employer consequences: The moving expenses are deductible and are not treated as wages.are deductible and are not treated as wages.

- - Employee consequences:  The moving Employee consequences:  The moving expense reimbursement is nontaxable but the expense reimbursement is nontaxable but the moving expenses are not deductible.moving expenses are not deductible.

References References

Leibowitz A., (1983), Leibowitz A., (1983), Fringe Benefits in Employee Fringe Benefits in Employee CompensationCompensation. from . from http://www.nber.org/chapters/c7385.pdfhttp://www.nber.org/chapters/c7385.pdf

MONEY MANAGEMENTMONEY MANAGEMENT (2003), from (2003), from http://www.lifetimefp.net/Advice110301.htmhttp://www.lifetimefp.net/Advice110301.htm

Robert W Robert W DitmerDitmer (January, 2010), (January, 2010),Taxation of Group Taxation of Group Term Life Insurance. From Term Life Insurance. From http://suite101.com/article/taxation-of-group-term-lifhttp://suite101.com/article/taxation-of-group-term-life-insurance-a188109e-insurance-a188109

Taxable Fringe Benefit Guide (January, 2012), fromTaxable Fringe Benefit Guide (January, 2012), from http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.phttp://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdfdf

Leibowitz A., (1983), Leibowitz A., (1983), Fringe Benefits in Employee Fringe Benefits in Employee CompensationCompensation. from . from http://www.nber.org/chapters/c7385.pdfhttp://www.nber.org/chapters/c7385.pdf

MONEY MANAGEMENTMONEY MANAGEMENT (2003), from (2003), from http://www.lifetimefp.net/Advice110301.htmhttp://www.lifetimefp.net/Advice110301.htm

Robert W Robert W DitmerDitmer (January, 2010), (January, 2010),Taxation of Group Taxation of Group Term Life Insurance. From Term Life Insurance. From http://suite101.com/article/taxation-of-group-term-lifhttp://suite101.com/article/taxation-of-group-term-life-insurance-a188109e-insurance-a188109

Taxable Fringe Benefit Guide (January, 2012), fromTaxable Fringe Benefit Guide (January, 2012), from http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.phttp://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdfdf

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