4.1. ERMUSR 05-12-2009 - Laserfiche WebLink

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Commuting transportation. This is transportation to or from work using any motorized wheeled vehicle (including an automobile) manufactured for use on public streets, roads, and highways. You or the employee must buy the transportation from a parry that is not related to you. If the employee buys it, you must reimburse the employee for its cost (for example, cab fare) under a bona fide reimburse- mentarrangement. Qualified employee. A qualified employee for 2008 is one who: • Performs services during the year, • Is paid on an hourly basis, • Is not claimed under section 213(a)(1) of the Fair Labor Standards Act of 1938 (as amended) to be exempt from the minimum wage and maximum hour provisions, • Is within a classification for which you actually pay, or have specified in writing that you will pay, over- time pay of at least one and one-half times the regu- lar rate provided in section 207 of the 1938 Act, and • Receives pay of not more than $100,000 during 2007. However, an employee is not considered a qualified em- ployee if you do not comply with the recordkeeping require- ments concerning the employee's wages, hours, and other conditions and practices of employment under section 21 i (c) of the 1938 Act and the related regulations. Unsafe conditions. Unsafe conditions exist if, under the facts and circumstances, a reasonable person would con- sider it unsafe for the employee to walk or use public transportation at the time of day the employee must com- mute. One factor indicating whether it is unsafe is the history of crime in the geographic area surrounding the employee's workplace or home at the time of day the employee commutes. 4. Rules for Withholding, Depositing, and Reporting Use the following guidelines for withholding, depositing, and reporting taxable noncash fringe benefits. For addi- tional information on how to withhold on fringe benefits, see Publication 15 (Circular E), section 5. Valuation of fringe benefits. Generally, you must deter- mine the value of noncash fringe benefits no later than January 31 of the next year. Before January 31, you may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time. Choice of period far withholding, depositing, and re- porting. For employment tax and withholding purposes, you can treat fringe benefits (including personal use of employer-provided highway motor vehicles} as paid on a pay period; quarter, semiannual, annual, or other basis. But the benefits must be treated as paid no less frequently than annually. You do not have to choose the same period for all employees. You can withhold more frequently for some employees than for others. You can change the period as often as you like as long as you treat all of the benefits provided in a calendar year as paid no later than December 31 of the calendar year. You can also treat the value of a single fringe benefit as paid on one or more dates in the same calendar year, even if the employee receives the entire benefit at one time. For example, if your employee receives a fringe benefit valued at $1,000 in one pay period during 2008, you can treat it as made in four payments of $250, each in a different pay period of 2008. You do not have to notify the IRS of the use of the periods discussed above. Transfer of property. The above choice for reporting and withholding does not apply to a fringe benefit that is a transfer of tangible or intangible personal property of a kind normally held for investment or a transfer of real property. For this kind of fringe benefit, you must use the actual date the property was transferred to the employee. Withholding and depositing taxes. You can add the value of fringe benefits to regular wages for a payroll period and figure income tax withholding on the total. Or you can withhold federal income tax on the value of fringe benefits at the flat 25% rate that applies to supplemental wages. See section 7 in Publication 15 (Circular E) for the flat rate (35%) when supplemental wage payments to an individual exceed $1,000,000 during the year. You must withhold the applicable income, social secur- ity, and Medicare taxes on the date or dates you chose to treat the benefits as paid. Deposit the amounts withheld as discussed in section 11 of Publication 15 (Circular E). Amount of deposit. To estimate the amount of income tax withholding and employment taxes and to deposit them on time, make a reasonable estimate of the value of the fringe benefits provided on the date or dates you chose to treat the benefits as paid. Determine the estimated deposit by figuring the amount you would have had to deposit if you had paid cash wages equal to the estimated value of the fringe benefits and withheld taxes from those cash wages. Even if you do not know which employee will receive the fringe benefit on the date the deposit is due, you should follow this procedure. If you underestimate the value of the fringe benefits and deposit less than the amount you would have had to deposit if the applicable taxes had been withheld, you may be subject to a penalty. If you overestimate the value of the fringe benefit and overdeposit, you can either claim a refund or have the overpayment applied to your next Form 941. If you paid the required amount of taxes but wi#hheld a lesser amount from the employee, you can recover from the employee the social security, Medicare, or income taxes you deposited on the employee's behalf and in- cluded on the employee's Form W-2. However, you must recover the income taxes before April 1 of the following year. Paying your employee's share of social security and Medicare taxes. if you choose to pay your employee's social security and Medicare taxes on taxable fringe bene- fits without deducting them from his or her pay, you must include the amount of the payments in the employee's income. Also, if your employee leaves your employment and you have unpaid and uncollected taxes for noncash benefits, you are still liable for those taxes. You must add the uncollected employee share of social security and Page 24 Publication 15-B (2008)