Unfortunately, the answer may be “no”.

The IRS uses what is known as the shotgun rule. All fringe benefits are taxable to the employee, unless there is a specific law exempting that benefit from taxation. That is they are generally deductible for the employer but taxable to the employee. An example of a benefit that might not be taxable to the employee is medical insurance. There is generally a law exempting medical insurance.

Fringe benefits are generally included in an employee’s gross income. The benefits are subject to income tax withholding and employment taxes. Fringe benefits include cars and flights on aircraft that the employer provides, free or discounted commercial flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events.

In general, the amount the employer must include is the amount by which the fair market value of the benefits is more than the sum of what the employee paid for it plus any amount that the law excludes.

If you want to explore fringe benefits for your company, especially fringe benefits that might be tax free to your employees, give us a call. [859-734-0304]

Published 1/282022