4.1. ERMUSR 05-12-2009 - Laserfiche WebLink

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Reminders Photographs of missing children. The Internal Reve- nue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publica- tion on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678} if you rec- ognize achild. Introduction This publication supplements Publication 15 (Circular E), Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide. It contains information for em- ployers on the employment tax trea#ment of fringe benefits. Comments and suggestions. We welcome your com- ments about this publication and your suggestions for future editions. You can write to us at the following address: Internal Revenue Service Business Forms and Publications Branch SE:W:CAR:MP:T:B 1111 Constitution Ave. NW, IR-6526 Washington, DC 20224 We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. You can email us at "taxformsC~irs.gov. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot re- spond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products. 1. Fringe Benefit Overview A fringe benefit is a form of pay for the performance of services. For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. Pefformance of services. A person who performs serv- ices for you does not have to be your employee. A person may perform services far you as an independent contrac- tor, partner, or director. Also; for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services. Provider of benefit. You are the provider of a fringe benefit if it is provided far services performed for you. You may be the provider of the benefit even if it was actually furnished by another person. You are the provider of a fringe benefit your client or customer provides to your employee for services the employee performs for you. Recipient of benefit. The person who performs services for you is the recipient of a fringe benefit provided for those services. That person may be the recipient even if the benefit is provided to someone who did not perform serv- ices for you. For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family. Are Fringe Benefits Taxable? Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. Section 2 discusses the exclusions that apply to certain fringe benefits. Any benefit not excluded under the rules discussed in section 2 is taxable. Including taxable benefits in pay. You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts. • Any amount the law excludes from pay. • Any amount the recipient paid for the benefit. The rules used to determine the value of a fringe benefit are discussed in section 3. If the recipient of a taxable fringe benefit is your em- ployee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. However, you can use special rules to withhold, deposit, and report the employment taxes. These rules are dis- cussed in section 4. If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. However, you may have to report the benefit on one of the following information returns. If the recipient receives the benefit as: Use: An independent contractor Form 1099-MISC A partner Schedule K-1 {Form 1065) For more information, see the instructions for the forms listed above. Cafeteria Plans A cafeteria plan, including a flexible spending arrange- ment, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable. Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. However, a cafeteria plan can include a qualified 401(k) plan as a benefit. Also, certain life insurance plans maintained by educational in- stitutions car, be offered as a benefit even though they defer pay. Page 2 Publication 15-B (2008)