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What are fringe benefits?

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Defining fringe benefits

Fringe benefits. You’ve heard the term tossed around, but you’re not quite sure what it means. Don’t worry we’ve got you covered. The IRS classifies fringe benefits as, “a form of pay for the performance of services” outside of an employees regular wages. Put simply, fringe benefits are the little ‘perks’ employees receive for working at a company that aren’t included in an employee’s regular income. 

It is important to note, however, that an individual doesn’t necessarily need to be an employee to receive fringe benefits. Independent contractors, partners, or directors performing services for an employer may also receive fringe benefits.

 

Examples of fringe benefits

  • Health insurance
  • Life insurance
  • Tuition assistance
  • Company-paid meals
  • Wellness programs
  • Paid time off
  • Commuter benefits
  • Health savings accounts

Which fringe benefits can be excluded from taxes?

The IRS indicates that any fringe benefit is taxable unless explicitly excluded by the law. Exclusions may include the full value of the fringe benefit or part of the value of the fringe benefit in the employee’s pay.

Typically, benefits that are considered ‘exclusions’ do not need to be reported on the W-2 as they aren’t subject to federal income tax withholding, social security, Medicare, federal unemployment (FUTA) tax, or Railroad Retirement Tax Act (RRTA) taxes. Here’s a list of fringe benefit types that qualify for full or part tax exemption:

  • Accident and health benefits.
  • Achievement awards.
  • Adoption assistance.
  • Athletic facilities.
  • De minimis (minimal) benefits.
  • Dependent care assistance.
  • Educational assistance.
  • Employee discounts.
  • Employee stock options.
  • Employer-provided cell phones.
  • Group-term life insurance coverage.
  • Health savings accounts (HSAs).
  • Lodging on your business premises.
  • Meals.
  • Moving expense reimbursements.
  • No-additional-cost services.
  • Retirement planning services.
  • Transportation (commuting) benefits.
  • Tuition reduction.
  • Working condition benefits.

Note: Be sure to verify the exemption status of each benefit type here.

Offer more fringe benefits with BerniePortal

Now that you understand the concept of fringe benefits, it’s time to start thinking about how to administer them. Fringe benefits attract quality candidates and retain current employees, however they also create significant work for administrators. What if you could streamline that workload? BerniePortal is an all-in-one HR and benefits software solution that allows small to medium-size employers to administer benefits without the added administrative burden. Interested in learning more?

 

Request Demo

 

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