Ten points about Preparing Year-end W-2s
You generally must include taxable fringe benefits in an employee’s gross income. Most are subject to income-tax withholding and employment taxes. Here are some of these taxable items to include:
1. Personal use of auto. The value of an employee’s personal use of a company-provided auto should be included as income. There are IRS guidelines to determine the amount of this calculation.
2. Value of life insurance if over $50,000. To the extent that the benefit of the life insurance exceeds $50,000, an amount as determined by IRS tables is a taxable fringe benefit.
3. Memberships in country club dues or other social clubs. If these payments are strictly for personal use by the employee, they are a taxable fringe.
4. Tickets to entertainment or sporting events. The value of the tickets for personal use should be included as taxable to the employee.
5. Discounts on property or services. The taxable portion is the extent to which the discount exceeds the cost of the product (or more than 20% of the price for services charged to customers.)
However, some fringe benefits are not taxable (or are minimally taxable) if certain conditions are met. Some of these items are as follows:
6. Services provided to your employees at no additional cost to you.
7. Certain minimal fringes, including an occasional cab ride if an employee must work overtime, or meals that you provide at eating places that you run for your employees if the meals are not furnished at below cost.
8. Qualified transportation fringes. These are subject to special conditions and dollar limitations, including transportation in a commuter highway vehicle.
9. Qualified moving-expense reimbursements. Reimbursed and employer-paid qualified moving expenses paid under an accountable plan are not includible in an employee’s W-2.
10. Use of on-premisis athletic facilities. If substantially all of the use is by employees, their spouses, or their dependents, this is not a taxable fringe benefit.
You should contact your tax advisor to determine the value of the taxable items to include, or to determine whether or not certain items are taxable.