Payroll Accounting: Payroll Fringe Benefits | Payroll Tax Fringe Benefits

A fringe benefit is a type of pay for services carried out. A fringe benefit is taxable unless the law specifically excludes it. See for yourself how Payroll Mate treats fringe benefits by downloading a free payroll software demo.

The value of a fringe benefit must be included in an employee’s pay if the value is more than the sum of the amount the recipient paid for the benefit or the law excludes the amount from the pay. Recipients of any fringe benefit, whom are considered employees, are subject to employment taxes. The fringe benefit is subject to Payroll taxes and must be reported on Form W2. Special payroll accounting rules apply to fringe benefits based on the recipient of the benefit and the tax-exempt fringe benefit laws.

Fringe benefits are tax exempt if they fall into specific exclusion rules. The benefit will be exempt from federal income tax and possibly social security, Medicare and or FUTA and will not be reported on W2 forms.

Some types of fringe benefits considered tax-exempt under the current payroll accounting rules:
Accident and health benefits
Achievement awards
Working condition benefits
Adoption assistance
Athletic facilities
De minimis (minimal) benefits
Dependent care assistance Educational assistance Employee discounts. Employee stock options
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 Volunteer firefighter and emergency medical responder benefits

Payroll software providers will find valuable information in IRS Publication15-B regarding treatment of fringe benefits under employment taxes.

Our payroll accounting solution supports user-defined Income, Tax, and Deduction categories. This feature allows employers to enter fringe benefits in a manner required by law. Easily enter fringe benefits as taxable or tax-exempt.

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