Posted on 06/25/2021 12:28:47 PM PDT by Oldeconomybuyer
Criminal democrat party government...again.
DAY 2: 50 million supporters each send President Trump a $20 donation.
Game .. Set .. Match!
I think those things are pretty common.
Is that considered taxable income?
No. A boss occasionally taking an employee out to lunch is not considered taxable income to the employee. Likely the boss will put it on an expense report and be reimbursed as it is presumably a work-related lunch even if little or no actual business was discussed. The key is “occasionally” and ostensibly for a business purpose even something as ill-defined such as “team building” or “moral”.
However, if this boss takes this one employee out to lunch each and every day, that “might” be considered taxable as it is no longer occasional and difficult to justify as work related.
Interestingly, if the company has an on-site cafeteria and provides free meals to employees because it is for the employer’s convenience, that is not taxable. But if the employer gives employees gift cards for local carryouts, that is taxable. FWIW, gift cards and gift certificates are according to the IRS a cash equivalent and cash compensation is always taxable.
I will say that many companies including ones I’ve worked for will give a $25-$30 grocery store gift card or gift certificate at Christmas to be used for the purchase of a turkey or ham, etc., and even while legally they should add it the gift card amount to the employee’s taxable income and or gross up for it, many don’t.
But I ran into issues where managers would buy gift cards, sometimes $100 -$500 or more each and get reimbursed for them on their expense reports. When I asked what the gift cards were for, I found out they were given to employees as a “thank you bonus”. I had to crack down on this and get an accounting of who received the gift cards so I could add the value as taxable income to the employee. The company stopped this practice completely by instituting a “spot bonus” program that would be paid via PR and thus taxed as it should be.
Annual Christmas parties are considered de minimis and not taxable.
Per the IRS de minimis fringe benefits include any property or service, provided by an employer for an employee, the value of which is so small in relation to the frequency with which it is provided, that accounting for it is unreasonable or administratively impracticable. The value of the benefit is determined by the frequency it’s provided to each employee, or, if this is not administratively practical, by the frequency provided by the employer to the workforce as a whole.
That’s a long way of saying “it is infrequent and the cost relative to the frequency is small, and it would be impossible to impute the value to each employee. “Did Joe eat more food at the party than Jill? Did Jane go back for a 2nd desert? Did Jack even attend, or did he only stop by for 10 minutes?”
The TV is a different matter. Even if only a one-time thing, the employer knows the exact cost of the TV and exactly who it was given to, so it is a taxable non-cash fringe benefit and the FMV has to be added to the employee’s taxable income.
The thing to also understand is that non-cash compensation or cash equivalents are not only taxable income to the employee and reported as Box 1 wages on their W2, it is also subject to the employer for their share of SS and Medicare PR tax and FUTA and SUTA tax.
It's worth noting that none of this was apparently a problem for the IRS, but it's a problem for New York State? LOL.
Taxable fringe benefits must be reported on the employees’ Box 1 wages on their W2 and federal and state income tax is to be withheld and remitted. The taxable fringes are also subject to the employers’ share of SS and Medicare PR tax and to FUTA and SUTA tax.
Personal use of a company car is always imputed income to the employee but also required to be reported by the employer and taxed accordingly.
If not, I imagine the IRS will eventually become interested.
Thank you very much for your in-depth reply. Your expertise is very informative and helpful.
Should have nailed their a##es when he had the chance but there were to many rats in his nest he trusted
One can obtain a degree in Human Resources or in Accounting but sadly there is no specialized degree for Payroll and IMO there should be as most HR folks and Accountants have little idea. I’ve known many Sr. HR executives and even CPA’s who were clueless when it came to taxation of fringe benefits or even how overtime works.
That and we experienced and knowledgeable payroll folks are often underpaid and underappreciated. One can get a CPP (Certified Payroll Professional) certificate through the American Payroll Assoc. but it is very expensive and not one of the employers I’ve worked for over the years was willing to pay or partially compensate me for it.
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