Beruflich Dokumente
Kultur Dokumente
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Important Changes
Cents-per-mile rule. The standard mileage rate you can
use under the cents-per-mile rule to value the personal use
of a vehicle you provide to an employee in 2002 is 36.5
cents a mile. See Cents-Per-Mile Rule in section 3.
Increase in public transit subsidy. Beginning January
1, 2002, the maximum benefit an employee may exclude
for combined commuter highway vehicle transportation
and transit passes increases to $100. See Qualified
Transportation Benefits in section 2.
Extension and expansion of exclusion for educational
assistance plans. The exclusion for educational assis-
tance has been extended to years after 2001. Expenses
for graduate level courses may be excluded for courses
beginning after 2001. See Educational Assistance in
section 2.
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Increase in adoption plan exclusion. Beginning with If the recipient of a taxable fringe benefit is your em-
2002, the amount of payments and reimbursements that ployee, the benefit is subject to employment taxes and
can be excluded under an adoption assistance plan in- must be reported on Form W –2. However, you can use
creases to $10,000 for each eligible child. This amount special rules to withhold, deposit, and report the employ-
also applies to special needs adoptions. For more informa- ment taxes. These rules are discussed in section 4.
tion, see Adoption Assistance in section 2. 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 it on one of the following
Introduction information returns.
This publication supplements Publication 15, Circular E,
Employer’s Tax Guide, and Publication 15-A, Employer’s If the recipient
receives the benefit as: Use:
Supplemental Tax Guide. It contains specialized and de-
An independent contractor . . . Form 1099 – MISC
tailed information on the employment tax treatment of A partner . . . . . . . . . . . . . . Schedule K – 1 (Form 1065)
fringe benefits. An S corporation shareholder Schedule K – 1 (Form 1120S)
Are Fringe Benefits Taxable? Benefits not allowed. A cafeteria plan cannot include
Any fringe benefit you provide is taxable and must be the following benefits discussed in section 2.
included in the recipient’s pay unless the law specifically • Archer medical savings accounts.
excludes it. Section 2 discusses the exclusions that apply
to certain fringe benefits. Any benefit not excluded under • Athletic facilities.
the rules discussed in section 2 is taxable. • De minimis (minimal) benefits.
Including taxable benefits in pay. You must include in a • Educational assistance.
recipient’s pay the amount by which the value of a fringe
benefit is more than the sum of the following amounts. • Employee discounts.
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Moving expense Exempt1 if expenses would be deductible if the employee had paid them.
reimbursements
No-additional cost services Exempt4 Exempt4 Exempt4
Transportation (commuting) Exempt1 up to certain limits if for rides in a commuter highway vehicle
benefits ($100), transit passes, ($100) or qualified parking ($185). See page 14.
Exempt if de minimis.
Tuition reduction Exempt4 if for undergraduate education (or graduate education if the
employee performs teaching or research activities).
Working condition benefits Exempt Exempt Exempt
1
Exemption does not apply to S corporation employees who are 2% shareholders. See page 3.
2
Exemption does not apply to certain highly compensated employees under a self-insured plan that favors those employees.
3
Exemption does not apply to certain highly compensated employees under a program that favors those employees.
4
Exemption does not apply to certain highly compensated employees.
5
Exemption does not apply to certain key employees under a plan that favors those employees.
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cussed in chapter 2 of Publication 535, Business Ex- adoption expenses. The determination that an adopted
penses. child is qualified as a child with special needs must be
made by the employee’s state.
Employee. For this exclusion, treat the following individu-
als as employees. Employee. For this exclusion, do not treat a 2% share-
holder of an S corporation as an employee of the corpora-
1) A current employee. tion. A 2% shareholder is someone who directly or
indirectly owns (at any time during the year) more than 2%
2) A former common-law employee that you maintain of the corporation’s stock or stock with more than 2% of the
coverage for in consideration of or based on an voting power.
agreement relating to prior service as an employee.
3) A leased employee who has provided services to
you on a substantially full-time basis for at least a
year if the services are performed under your pri-
Athletic Facilities
mary direction or control. You can exclude the value of an employee’s use of an
on-premises gym or other athletic facility you operate from
Exception for S corporation shareholders. Do not the employee’s wages if substantially all use of the facility
treat a 2% shareholder of an S corporation as an employee during the calendar year is by your employees, their
of the corporation. A 2% shareholder is someone who spouses, and their dependent children. For this purpose,
directly or indirectly owns (at any time during the year) an employee’s dependent child is a child or stepchild who
more than 2% of the corporation’s stock or stock with more is the employee’s dependent or who, if both parents are
than 2% of the voting power. deceased, is age 24 or younger.
Exclusion from wages. You can generally exclude the On-premises facility. The athletic facility must be located
value of achievement awards you give to an employee on premises you own or lease. It does not have to be
from the employee’s wages if their cost is not more than located on your business premises. However, the exclu-
the amount you can deduct as a business expense for the sion does not apply to an athletic facility for residential use,
year. That amount is $1,600 ($400 for awards that are not such as athletic facilities that are part of a resort.
“qualified plan awards”). See chapter 2 of Publication 535 Employee. For this exclusion, treat the following individu-
for more information on the limit on deductions for em- als as employees.
ployee achievement awards.
To determine for 2002 whether an achievement 1) A current employee.
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CAUTION
award is a “qualified plan award” under the de-
duction rules described in Pub. 535, treat any
2) A former employee who retired or left on disability.
employee who received more than $90,000 in pay for 2001 3) A widow or widower of an individual who died while
as a highly compensated employee. an employee.
4) A widow or widower of a former employee who re-
If the cost of awards given to an employee is more than tired or left on disability.
your allowable deduction, include in the employee’s wages 5) A leased employee who has provided services to
the larger of the following amounts. you on a substantially full-time basis for at least a
• The part of the cost that is more than your allowable year if the services are performed under your pri-
mary direction or control.
deduction (up to the value of the awards).
6) A partner who performs services for a partnership.
• The amount by which the value of the awards ex-
ceeds your allowable deduction.
You exclude the remaining value of the awards from the
employee’s wages. De Minimis (Minimal) Benefits
You can exclude the value of a de minimis benefit you
provide to an employee from the employee’s wages. A de
Adoption Assistance minimis benefit is any property or service you provide to an
employee that has so little value (taking into account how
You can exclude payments or reimbursements you make
frequently you provide similar benefits to your employees)
under an adoption assistance program for an employee’s
that accounting for it would be unreasonable or administra-
qualified adoption expenses of up to $10,000 per qualify-
tively impracticable. Cash, no matter how little, is never
ing child from the employee’s wages subject to federal
excludable as a de minimis benefit, except for occasional
income tax withholding. However, you cannot exclude
meal money or transportation fare.
these payments from wages subject to social security,
Examples of de minimis benefits include the following:
Medicare, and federal unemployment taxes. For more in-
formation, see Publication 968, Tax Benefits for Adoption. • Copying machine use. Occasional personal use of
Beginning in 2003, you may exclude $10,000 from an a company copying machine, if you sufficiently con-
employee’s wages for the adoption of a child with special trol its use so that at least 85% of its use is for
needs regardless of whether the employee has qualified business purposes, is a de minimis benefit.
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• Holiday gifts. Holiday gifts, other than cash, with a assistance program each year. This limit is reduced to
low fair market value are de minimis benefits. $2,500 for married employees filing separate returns.
However, the exclusion cannot be more than the earned
• Life insurance on spouse or dependent. income of either:
Group-term life insurance payable on the death of an
employee’s spouse or dependent is a de minimis 1) The employee, or
benefit if the face amount is not more than $2,000.
2) The employee’s spouse.
• Meals. De minimis meals are discussed under
Meals, later. Special rules apply to determine the earned income of a
spouse who is either a student or not able to care for
• Parties and picnics. Occasional parties or picnics himself or herself. For more information on the earned
for employees and their guests are de minimis bene- income limit, see Publication 503.
fits.
Exception for highly compensated employees. You
• Tickets for entertainment or sporting events. Oc- cannot exclude dependent care assistance from the
casional tickets for entertainment or sporting events wages of a highly compensated employee unless the ben-
are de minimis benefits. efits provided under the program do not favor highly com-
• Transportation fare. De minimis transportation fare pensated employees and the program meets the
is discussed under Transportation (Commuting) requirements described in section 129(d) of the Internal
Benefits, later. Revenue Code.
For this exclusion, a highly compensated employee for
• Typing. Occasional typing of personal letters by a 2002 is an employee who meets either of the following
company secretary is a de minimis benefit. tests.
1) The employee was a 5% owner at any time during
Employee. For this exclusion, treat any recipient of a de
the year or the preceding year.
minimis benefit as an employee.
2) The employee received more than $90,000 in pay for
the preceding year.
Dependent Care You can choose to ignore test (2) if the employee was not
also in the top 20% of employees when ranked by pay for
Assistance the preceding year.
This exclusion applies to household and dependent care Form W –2. Report the value of all dependent care assis-
services you pay for (directly or indirectly) or provide to an tance you provide to an employee under a dependent care
employee under a dependent care assistance program assistance program in box 10 of the employee’s Form
that covers only your employees. The services must be for W–2. Include any amounts you cannot exclude from the
a qualifying person’s care and must allow the employee to employee’s wages in boxes 1, 3, and 5.
work. These requirements are basically the same as the
tests the employee would have to meet to claim the depen-
dent care credit if the employee paid for the services. For
more information, see Qualifying Person Test and
Educational Assistance
Work-Related Expense Test in Publication 503, Child This exclusion applies to educational assistance you pro-
and Dependent Care Expenses. vide to employees under an educational assistance pro-
gram. For expenses relating to courses beginning in 2002,
Employee. For this exclusion, treat the following individu- the exclusion also applies to graduate level courses.
als as employees. Educational assistance means amounts you pay or in-
cur for your employees’ education expenses. These ex-
1) A current employee.
penses generally include the cost of books, equipment,
2) A leased employee who has provided services to fees, supplies, and tuition. Also, these expenses do not
you on a substantially full-time basis for at least a include the cost of a course or other education involving
year if the services are performed under your pri- sports, games, or hobbies, unless the education:
mary direction or control.
1) Has a reasonable relationship to your business, or
3) Yourself (if you are a sole proprietor).
2) Is required as part of a degree program.
4) A partner who performs services for a partnership.
Education expenses do not include the cost of tools or
supplies (other than textbooks) that your employee is al-
Exclusion from wages. You can exclude the value of lowed to keep at the end of the course. Nor do they include
benefits you provide to an employee under a dependent the cost of lodging, meals, or transportation.
care assistance program from the employee’s wages if you
reasonably believe that the employee can exclude the Educational assistance program. An educational assis-
benefits from gross income. tance program is a separate written plan that provides
An employee can generally exclude from gross income educational assistance only to your employees. The pro-
up to $5,000 of benefits received under a dependent care gram qualifies only if all of the following tests are met.
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For this rule, count employees who choose not to re- participation or benefits, you must include the entire cost of
ceive the insurance unless, to receive it, they must contrib- the insurance in your key employees’ wages subject to
ute to the cost of benefits other than the group-term life social security and Medicare taxes. You must also include
insurance. For example, count an employee who could the entire cost of the insurance in the employees’ wages
receive insurance by paying part of the cost, even if that shown in boxes 1, 3, and 5 of Form W-2. However, you can
employee chooses not to receive it. However, do not count exclude the cost of this insurance from the employees’
an employee who must pay part or all of the cost of wages subject to federal income tax withholding and fed-
permanent benefits to get insurance, unless that employee eral unemployment tax.
chooses to receive it. This exception generally does not apply to church plans.
Exceptions. Even if you do not meet the 10-employee For this purpose, the cost of the insurance is the greater
rule, two exceptions allow you to treat insurance as of the following amounts.
group-term life insurance. 1) The premiums you pay for the employee’s insurance.
Under the first exception, you do not have to meet the
10-employee rule if all the following conditions are met. 2) The cost you figure using the table shown later under
Coverage over the limit.
1) If evidence that the employee is insurable is re-
quired, it is limited to a medical questionnaire (com- For this exclusion, a key employee during 2002 is an
pleted by the employee) that does not require a employee or former employee who is one of the following
physical. individuals. See section 416(i) for more information.
2) You provide the insurance to all your full-time em- 1) An officer having annual pay of more than $130,000.
ployees or, if the insurer requires the evidence men- 2) An individual who for 2002 was either of the follow-
tioned in (1), to all full-time employees who provide ing:
evidence the insurer accepts.
3) You figure the coverage based on either a uniform a) A 5% owner of your business.
percentage of pay or the insurer’s coverage brack- b) A 1% owner of your business whose annual pay
ets. was more than $150,000.
Under the second exception, you do not have to meet
the 10-employee rule if all the following conditions are met. A former employee who was a key employee upon
retirement or separation from service is also a key em-
1) You provide the insurance under a common plan ployee.
covering your employees and the employees of at Your plan does not favor key employees as to partici-
least one other employer who is not related to you. pation if at least one of the following is true.
2) The insurance is restricted to, but mandatory for, all 1) It benefits at least 70% of your employees.
your employees who belong to or are represented by
an organization (such as a union) that carries on 2) At least 85% of the participating employees are not
substantial activities besides obtaining insurance. key employees.
3) Evidence of whether an employee is insurable does 3) It benefits employees who qualify under a set of
not affect an employee’s eligibility for insurance or rules you set up that do not favor key employees.
the amount of insurance that employee gets. Your plan meets this participation test if it is part of a
To apply either exception, do not consider employees cafeteria plan (discussed in section 1) and it meets the
who were denied insurance for any of the following rea- participation test for those plans.
sons. When applying this test do not consider employees
who:
1) They were 65 or older.
1) Have not completed 3 years of service.
2) They customarily work 20 hours or less a week or 5
months or less in a calendar year. 2) Are part time or seasonal.
3) They have not been employed for the waiting period 3) Are nonresident aliens who receive no U.S. source
given in the policy. This waiting period cannot be earned income from you.
more than 6 months. 4) Are not included in the plan but are in a unit of
employees covered by a collective bargaining agree-
Exclusion from wages. You can generally exclude all ment, if the benefits provided under the plan were
group-term life insurance coverage you provide to an em- the subject of good-faith bargaining between you and
ployee from the employee’s wages subject to federal in- employee representatives.
come tax withholding and federal unemployment tax. In
Your plan does not favor key employees as to benefits
addition, you can exclude the cost of up to $50,000 of
if all benefits available to participating key employees are
coverage from wages subject to social security and Medi-
also available to all other participating employees. Your
care taxes.
plan does not favor key employees just because the
Exception for key employees. Generally, if your amount of insurance you provide to your employees is
group-term life insurance plan favors key employees as to uniformly related to their pay.
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S corporation shareholders. Because you cannot Different tests may apply to lodging furnished by educa-
treat a 2% shareholder of an S corporation as an employee tional institutions. For information, see section 119(d) of
for this exclusion, you must include the value of all the Internal Revenue Code.
group-term life insurance coverage you provide the em- This exclusion does not apply if you allow your em-
ployee in the employee’s wages subject to social security ployee to choose to receive additional pay instead of lodg-
and Medicare taxes. You must also include the value of ing.
this coverage in the employee’s wages shown in boxes 1,
3, and 5 of Form W– 2. However, you can exclude the On your business premises. For this exclusion, your
value of this coverage from the employee’s wages subject business premises is generally your employee’s place of
to federal income tax withholding and federal unemploy- work. (For special rules that apply to lodging furnished in a
ment tax. camp located in a foreign country, see section 119(c) of the
Internal Revenue Code and the related regulations.)
Coverage over the limit. You must include in your
employee’s wages subject to social security and Medicare For your convenience. Whether you furnish lodging for
taxes the cost of group-term life insurance that is more your convenience as an employer depends on all the facts
than the cost of $50,000 of coverage, reduced by the and circumstances. You furnish the lodging to your em-
amount the employee paid toward the insurance. Report it ployee for your convenience if you do this for a substantial
as wages in boxes 1, 3, and 5 of the employee’s Form W-2. business reason other than to provide the employee with
Also, show it in box 12 with code C. additional pay. This is true even if a law or an employment
Former employees must pay the employee’s part of contract provides that the lodging is furnished as pay.
social security and Medicare taxes on the cost of the However, a written statement that the lodging is furnished
excess coverage with their Form 1040. You are not re- for your convenience is not sufficient.
quired to collect these taxes. Report the uncollected social
Condition of employment. Lodging meets this test if you
security tax with code M and the uncollected Medicare tax
require your employees to accept it because they need to
with code N in box 12 of Form W–2.
live on your business premises to be able to properly
Figure the monthly cost of the insurance to include in the perform their duties. Examples include employees who
employee’s wages by multiplying the number of thousands must be available at all times and employees who could
of dollars of insurance coverage over $50,000 (figured to not perform their required duties without being furnished
the nearest $100) by the cost shown in the following table. the lodging.
Use the employee’s age on the last day of the tax year. It does not matter whether you must furnish the lodging
You must prorate the cost from the table if less than a full as pay under the terms of an employment contract or a law
month of coverage is involved. fixing the terms of employment.
COST PER $1,000 OF PROTECTION
FOR ONE MONTH Example. A hospital gives Joan, an employee of the
hospital, the choice of living at the hospital free of charge or
Age Cost living elsewhere and receiving a cash allowance in addition
Under 25 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .05 to her regular salary. If Joan chooses to live at the hospital,
25 through 29 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .06
30 through 34 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .08 the hospital cannot exclude the value of the lodging from
35 through 39 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .09 her wages because she is not required to live at the
40 through 44 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 hospital to properly perform the duties of her employment.
45 through 49 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
50 through 54 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23 S corporation shareholder-employee. For this exclu-
55 through 59 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
60 through 64 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 sion, do not treat a 2% shareholder of an S corporation as
65 through 69 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.27 an employee of the corporation. A 2% shareholder is
70 and older . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.06 someone who directly or indirectly owns (at any time dur-
You figure the total cost to include in the employee’s ing the year) more than 2% of the corporation’s stock or
wages by multiplying the monthly cost by the number of full stock with more than 2% of the voting power.
months coverage at that cost.
Meals
Lodging on Your This section discusses the exclusion rules that apply to the
Business Premises following meals.
• De minimis meals
You can exclude the value of lodging you furnish to an
employee from the employee’s wages if it meets the follow- • Meals on your business premises
ing tests.
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Employees available for emergency calls. Meals you the value of meals you furnish on a day when the employee
furnish during working hours so an employee will be avail- is not working. However, you can exclude these meals if
able for emergency calls during the meal period are fur- they are furnished with lodging that is excluded from the
nished for your convenience. You must be able to show employee’s wages under the rules discussed under Lodg-
that these emergency calls have occurred or can reasona- ing on Your Business Premises, earlier.
bly be expected to occur. Meals with a charge. The fact that you charge for the
meals and that your employees may accept or decline the
Example. A hospital maintains a cafeteria on its prem- meals is not taken into account in determining whether
ises where all of its 230 employees may get meals at no meals are furnished for your convenience.
charge during their working hours. The hospital furnishes
meals to have 120 employees available for emergencies. S corporation shareholder-employee. For this exclu-
Each of these employees is at times called upon to perform sion, do not treat a 2% shareholder of an S corporation as
services during the meal period. Although the hospital an employee of the corporation. A 2% shareholder is
does not require these employees to remain on the prem- someone who directly or indirectly owns (at any time dur-
ises, they rarely leave the hospital during their meal period. ing the year) more than 2% of the corporation’s stock or
Since the hospital furnishes meals on its premises to its stock with more than 2% of the voting power.
employees so that more than half of them are available for
emergency calls during meal periods, the hospital can
exclude the value of these meals from the wages of all its
employees.
Moving Expense
Short meal periods. Meals you furnish during working Reimbursements
hours are furnished for your convenience if the nature of
This exclusion applies to any amount you give an em-
your business restricts an employee to a short meal period
ployee, directly or indirectly (including services furnished in
(such as 30 or 45 minutes) and the employee cannot be
kind), as a payment for, or a reimbursement of, moving
expected to eat elsewhere in such a short time. For exam-
expenses. You must make the reimbursements under
ple, meals can qualify for this treatment if your peak wor-
rules similar to those described in chapter 13 of Publication
kload occurs during the normal lunch hour. However, they
535 for reimbursements of expenses for travel, meals, and
do not qualify if the reason for the short meal period is to
entertainment under accountable plans.
allow the employee to leave earlier in the day. This exclusion applies only to reimbursements of mov-
ing expenses that the employee could deduct if he or she
Example. Frank is a bank teller who works from 9 a.m. had paid or incurred them without reimbursement. How-
to 5 p.m. The bank furnishes his lunch without charge in a ever, it does not apply if the employee actually deducted
cafeteria the bank maintains on its premises. The bank the expenses in a previous year.
furnishes these meals to Frank to limit his lunch period to Deductible moving expenses include only the reasona-
30 minutes, since the bank’s peak workload occurs during ble expenses of:
the normal lunch period. If Frank got his lunch elsewhere, it
would take him much longer than 30 minutes and the bank 1) Moving household goods and personal effects from
strictly enforces the time limit. The bank can exclude the the former home to the new home, and
value of these meals from Frank’s wages.
2) Traveling (including lodging) from the former home to
Proper meals not otherwise available. Meals you fur- the new home.
nish during working hours are furnished for your conve-
nience if the employee could not otherwise eat proper Deductible moving expenses do not include any
meals within a reasonable period of time. For example,
meals can qualify for this treatment if there are insufficient
!
CAUTION
expenses for meals.
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more than 2% of the corporation’s stock or stock with more 5) A leased employee who has provided services to
than 2% of the voting power. you on a substantially full-time basis for at least a
year if the services are performed under your pri-
Exclusion from wages. You can generally exclude quali- mary direction or control.
fying moving expense reimbursements you provide to an
employee from the employee’s wages. If you paid the 6) A partner who performs services for a partnership.
reimbursements directly to the employee, report their Treat services you provide to the spouse or dependent
amount in box 12 of the Form W–2 with the code P. Do not child of an employee as provided to the employee. For this
report payments to a third party for the employee’s moving fringe benefit, “dependent child” means any son, stepson,
expenses or the value of moving services you provide. daughter, or stepdaughter who is a dependent of the em-
ployee, or both of whose parents have died and who has
not reached age 25. Treat a child of divorced parents as a
No-Additional-Cost Services dependent of both parents.
Treat any use of air transportation by the parent of an
This exclusion applies to a service you provide to an employee as use by the employee. This rule does not
employee that does not cause you to incur any substantial apply to use by the parent of a person considered an
additional costs. The service must be offered to customers employee because of item (3) above.
in the ordinary course of the line of business in which the
employee performs substantial services. Exclusion from wages. You can generally exclude the
Generally, no-additional-cost services are excess ca- value of a no-additional-cost service you provide to an
pacity services, such as airline, bus, or train tickets; hotel employee from the employee’s wages.
rooms; or telephone services provided free or at a reduced Exception for highly compensated employees. You
price to employees working in those lines of business. cannot exclude from the wages of a highly compensated
Substantial additional costs. To determine whether you employee the value of a no-additional-cost service that is
incur substantial additional costs to provide a service to an not available on the same terms to one of the following
employee, count any lost revenue as a cost. Do not reduce groups.
the costs you incur by any amount the employee pays for
1) All your employees, or
the service. You are considered to incur substantial addi-
tional costs if you or your employees spend a substantial 2) A group of employees defined under a reasonable
amount of time in providing the service, even if the time classification you set up that does not favor highly
spent would otherwise be “idle” or if the services are compensated employees.
provided outside normal business hours.
For this exclusion, a highly compensated employee for
Reciprocal agreements. A no-additional-cost service 2002 is an employee who meets either of the following
provided to your employee by an unrelated employer may tests.
qualify as a no-additional-cost service if all the following
tests apply: 1) The employee was a 5% owner at any time during
the year or the preceding year.
1) The service is the same type of service generally 2) The employee received more than $90,000 in pay for
provided to customers in both the line of business in the preceding year.
which the employee works and the line of business
in which the service is provided. You can choose to ignore test (2) if the employee was not
also in the top 20% of employees when ranked by pay for
2) You and the employer providing the service have a the preceding year.
written reciprocal agreement under which a group of
employees of each employer, all of whom perform
substantial services in the same line of business,
may receive no-additional-cost services from the Retirement Planning Services
other employer.
You may exclude from wages the value of any retirement
3) Neither you nor the other employer incurs any sub- planning advice or information provided to your employee
stantial additional cost either in providing the service or his or her spouse if you maintain a qualified retirement
or because of the written agreement. plan. The advice and information may concern retirement
generally, and not only the employer plan. However, the
Employee. For this exclusion, treat the following Individu- exclusion does not apply to services for tax preparation,
als as employees. accounting, legal, or brokerage services.
1) A current employee.
2) A former employee who retired or left on disability. Transportation (Commuting)
3) A widow or widower of an individual who died while
an employee.
Benefits
4) A widow or widower of a former employee who re- This section discusses exclusion rules that apply to bene-
tired or left on disability. fits you provide your employees for their personal transpor-
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tation, such as commuting to and from work. These rules Transit pass. A transit pass is any pass, token, farecard,
apply to the following transportation benefits. voucher, or similar item entitling a person to ride, free of
charge or at a reduced rate, one of the following:
• De minimis transportation benefits.
• Mass transit.
• Qualified transportation benefits.
• In a vehicle that seats at least 6 adults (not including
Special rules that apply to demonstrator cars and qualified the driver) if a person in the business of transporting
nonpersonal-use vehicles are discussed under Working persons for pay or hire operates it.
Condition Benefits, later.
Mass transit may be publicly or privately operated and
includes bus, rail, or ferry.
De Minimis Transportation Benefits
Qualified parking. Qualified parking is parking you pro-
You can exclude the value of any de minimis transportation vide to your employees on or near your business premises.
benefit you provide to an employee from the employee’s It also includes parking on or near the location from which
wages. A de minimis transportation benefit is any transpor- your employees commute to work using mass transit,
tation benefit you provide to an employee that has so little commuter highway vehicles, or carpools. It does not in-
value (taking into account how frequently you provide clude parking at or near your employee’s home.
transportation to your employees) that accounting for it
would be unreasonable or administratively impracticable. Employee. For this exclusion, treat the following individu-
For example, it applies to occasional transportation fare als as employees.
you give an employee because the employee is working 1) A current employee.
overtime, if the benefit is reasonable and is not based on
hours worked. 2) A leased employee who has provided services to
you on a substantially full-time basis for at least a
Employee. For this exclusion, treat any recipient of a de year if the services are performed under your pri-
minimis transportation benefit as an employee. mary direction or control.
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1) A current employee.
Vehicle allocation rules. If you provide a car for an
2) A former employee who retired or left on disability. employee’s use, the amount you can exclude as a working
3) A widow or widower of an individual who died while condition benefit is the amount that would be allowable as
an employee. a deductible business expense if the employee paid for its
use. That is, if the employee uses the car for both business
4) A widow or widower of a former employee who re- and personal use, the value of the working condition bene-
tired or left on disability. fit is the part determined to be for business use of the
5) A dependent child or spouse of any individual listed vehicle. See Business use of your car under Personal
in (1) through (4), above. Expenses in chapter 1 of Publication 535. Also, see the
special rules for certain demonstrator cars and qualified
A tuition reduction for graduate education qualifies for
nonpersonal-use vehicles, discussed next.
this exclusion only if it is for the education of a graduate
student who performs teaching or research activities for However, instead of excluding the value of the working
the educational organization. condition benefit, you can include the entire annual lease
value of the car in the employee’s wages. The employee
For more information on this exclusion, see Publication
520, Scholarships and Fellowships. can then claim any deductible business expense for the
car as an itemized deduction on his or her personal income
tax return. This option is available only if you use the lease
value rule (discussed in section 3) to value the benefit.
Working Condition Benefits
Demonstrator cars. All of the use of a demonstrator car
This exclusion applies to property and services you pro- by your full-time auto salesperson generally qualifies as a
vide to an employee so that the employee can perform his working condition benefit if the use is primarily to facilitate
or her job. It applies to the extent the employee could the services the salesperson provided for you and there
deduct the cost of the property or services as a business are substantial restrictions on personal use. For more
expense or depreciation expense if he or she had paid it. information and the definition of “full-time auto salesper-
The employee must meet any substantiation requirements son,” see section 1.132-5(o) of the regulations.
that apply to the deduction. Examples of working condition
benefits include an employee’s use of a company car for Qualified nonpersonal-use vehicles. All of an
business and job-related education provided to an em- employee’s use of a qualified nonpersonal-use vehicle is a
ployee.
working condition benefit. A qualified nonpersonal-use ve-
This exclusion also applies to a cash payment you hicle is any vehicle the employee is not likely to use more
provide for an employee’s expenses for a specific or prear- than minimally for personal purposes because of its de-
ranged business activity for which a deduction is allowable sign. Qualified nonpersonal-use vehicles generally include
to the employee. You must require the employee to verify all of the following vehicles.
that the payment is actually used for those expenses and
to return any unused part of the payment. 1) Clearly marked police and fire vehicles.
For information on deductible employee business ex-
penses, see Unreimbursed Employee Expenses in Pub- 2) Unmarked vehicles used by law enforcement officers
lication 529, Miscellaneous Deductions. if the use is officially authorized.
The exclusion does not apply to the following items. 3) An ambulance or hearse used for its specific pur-
pose.
• A service or property provided under a flexible
spending account in which you agree to provide the 4) Any vehicle designed to carry cargo with a loaded
employee, over a time period, a certain level of un- gross vehicle weight over 14,000 pounds.
specified noncash benefits with a predetermined 5) Delivery trucks with seating for the driver only, or the
cash value. driver plus a folding jump seat.
• A physical examination program you provide, even if 6) A passenger bus with a capacity of at least 20 pas-
mandatory.
sengers used for its specific purpose.
• Any item to the extent the employee could deduct its 7) School buses.
cost as an expense for a trade or business other
than your trade or business. 8) Tractors and other special purpose farm vehicles.
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Pickup trucks. A pickup truck with a loaded gross vehi- Exception for independent contractors. You cannot
cle weight of 14,000 pounds or less is a qualified nonper- exclude the value of parking or the use of consumer goods
sonal use vehicle if it has been specially modified so it is you provide in a product testing program from the compen-
not likely to be used more than minimally for personal sation you pay to an independent contractor who performs
purposes. For example, a pickup truck qualifies if it is services for you.
clearly marked with permanently affixed decals, special
Exception for company directors. You cannot ex-
painting, or other advertising associated with your trade,
clude the value of the use of consumer goods you provide
business, or function and meets either of the following
in a product testing program from the compensation you
requirements.
pay to a director.
1) It is equipped with at least one of the following items.
a) A hydraulic lift gate. 3. Fringe Benefit Valuation
b) Permanent tanks or drums.
c) Permanent side boards or panels that materially
Rules
raise the level of the sides of the truck bed. This section discusses the rules you must use to determine
d) Other heavy equipment (such as an electric gen- the value of a fringe benefit you provide to an employee.
erator, welder, boom, or crane used to tow auto- You must determine the value of any benefit you cannot
mobiles and other vehicles). exclude under the rules in section 2 or for which the
amount you can exclude is limited. See Including taxable
2) It is used primarily to transport a particular type of benefits in pay under Are Fringe Benefits Taxable? in
load (other than over the public highways) in a con- section 1.
struction, manufacturing, processing, farming, min- In most cases, you must use the general valuation rule
ing, drilling, timbering, or other similar operation for to value a fringe benefit. However, you may be able to use
which it was specially designed or significantly modi- a special valuation rule to determine the value of certain
fied. benefits.
This section does not discuss the special valuation rule
Vans. A van with a loaded gross vehicle weight of used to value meals provided at an employer-operated
14,000 pounds or less is a qualified nonpersonal use eating facility for employees. These rules are discussed in
vehicle if it has been specially modified so it is not likely to section 1.61-21(j) of the regulations. This section also does
be used more than minimally for personal purposes. For not discuss the special valuation rules used to value the
example, a van qualifies if it is clearly marked with perma- use of aircraft. These rules are discussed in sections
nently affixed decals, special painting, or other advertising 1.61-21(g) and (h) of the regulations.
associated with your trade, business, or function and has a This section discusses the general valuation rule and
seat for the driver only (or the driver and one other person) the following special valuation rules for employee transpor-
and either of the following items. tation benefits.
1) Permanent shelving that fills most of the cargo area. • Cents-per-mile rule
2) An open cargo area and the van always carries mer- • Commuting rule
chandise, material, or equipment used in your trade, • Lease value rule
business, or function.
• Unsafe conditions commuting rule
Outplacement services. An employee’s use of outplace-
ment services qualifies as a working condition benefit if
you provide the services to the employee on the basis of General Valuation Rule
need and you get a substantial business benefit from the
services distinct from the benefit you would get from the You must use the general valuation rule to determine the
payment of additional wages. Substantial business bene- value of most fringe benefits. Under this rule, the value of a
fits include promoting a positive business image, maintain- fringe benefit is its fair market value.
ing employee morale, and avoiding wrongful termination
suits. Fair market value. The fair market value of a fringe bene-
Outplacement services do not qualify as a working con- fit is the amount an employee would have to pay a third
dition benefit if the employee can choose to receive cash party in an arm’s-length transaction to buy or lease the
or taxable benefits in place of the services. If you maintain benefit. Determine this amount on the basis of all the facts
a severance plan and permit employees to get outplace- and circumstances.
ment services with reduced severance pay, include in the Neither the amount the employee considers to be the
employee’s wages the difference between the unreduced value of the fringe benefit nor the cost you incur to provide
severance and the reduced severance payments. the benefit determines its fair market value.
Exclusion from wages. You can generally exclude the Employer-provided vehicles. In general, the fair market
value of a working condition benefit you provide to an value of an employer-provided vehicle is the amount the
employee from the employee’s wages. employee would have to pay a third party to lease the
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same or a similar vehicle on the same or comparable terms occasional trips to the airport or between your multi-
in the geographic area where the employee uses the ple business premises, is not regular use of the vehi-
vehicle. A comparable lease term would be the amount of cle in your trade or business.
time the vehicle is available for the employee’s use, such
as a 1-year period.
Mileage test. A vehicle meets the mileage test for a calen-
Do not determine the fair market value by multiplying a
dar year if both of the following requirements are met.
cents-per-mile rate times the number of miles driven un-
less the employee can prove the vehicle could have been 1) The vehicle is actually driven at least 10,000 miles
leased on a cents-per-mile basis. See Cents-Per-Mile during the year. If you own or lease the vehicle only
Rule, next. part of the year, reduce the 10,000 mile requirement
proportionately.
Cents-Per-Mile Rule 2) The vehicle is used during the year primarily by em-
ployees. Consider the vehicle used primarily by em-
Under this rule, you determine the value of a vehicle you ployees if they use it consistently for commuting. Do
provide to an employee for personal use by multiplying the not treat use of the vehicle by another individual
standard mileage rate by the total miles the employee whose use would be taxed to the employee as use
drives the vehicle for personal purposes. Personal use is by the employee.
any use of the vehicle other than use in your trade or For example, if only one employee uses a vehicle
business. This amount must be included in the employee’s during the calendar year and that employee drives the
wages or reimbursed by the employee. For 2002, the vehicle at least 10,000 miles in that year, the vehicle meets
standard mileage rate is 36.5 cents a mile. the mileage test even if all miles driven by the employee
Maximum automobile value. You cannot use are personal.
!
CAUTION
the cents-per-mile rule for an automobile (any
4-wheeled vehicle, such as a car, pickup, or van) Consistency requirements. If you use the
if its value when you first make it available to any employee cents-per-mile rule, the following requirements apply:
for personal use is more than an amount determined by the
IRS as the maximum automobile value for the year. For 1) You must begin using this rule the first day you make
example, you cannot use the cents-per-mile rule for an the vehicle available to any employee for personal
automobile you first made available to an employee in use. However, if you use the commuting rule when
2001 if its value at that time was more than $15,400. The you first make the vehicle available to any employee
maximum automobile value for 2002 will be published in a for personal use, you can change to the
revenue procedure in the Internal Revenue Bulletin early in cents-per-mile rule on the first day for which you do
2002. If you and the employee own or lease the automobile not use the commuting rule.
together, see section 1.61-21(e)(1)(iii) of the regulations. 2) You must use this rule for all later years in which you
make the vehicle available to any employee and the
You can use the cents-per-mile rule if either of the vehicle qualifies, except that you can use the com-
following requirements is met. muting rule for any year during which use of the
vehicle qualifies. However, if the vehicle does not
1) You reasonably expect the vehicle to be regularly qualify for the cents-per-mile rule during a later year,
used in your trade or business throughout the calen- you can use for that year and thereafter any other
dar year (or for a shorter period during which you rule for which the vehicle then qualifies.
own or lease it). 3) You must continue to use this rule if you provide a
2) The vehicle meets the mileage test. replacement vehicle to the employee and your pri-
mary reason for the replacement is to reduce federal
Vehicle. For this rule, a vehicle is any motorized wheeled taxes.
vehicle, including an automobile, manufactured primarily
for use on public streets, roads, and highways. Items included in cents-per-mile rate. The
cents-per-mile rate includes the value of maintenance and
Regular use in your business. A vehicle is regularly insurance for the vehicle. Do not reduce the rate by the
used in your trade or business if at least one of the value of any service included in the rate that you did not
following conditions is met. provide. (You can take into account the services actually
1) At least 50% of the vehicle’s total annual mileage is provided for the vehicle by using the general valuation rule
for your trade or business. discussed earlier.)
For miles driven in the United States, its territories and
2) You sponsor a commuting pool that generally uses possessions, Canada, and Mexico, the cents-per-mile rate
the vehicle each workday to drive at least 3 employ- includes the value of fuel you provide. If you do not provide
ees to and from work. fuel, you can reduce the rate by no more than 5.5 cents.
3) The vehicle is regularly used in your trade or busi- For special rules that apply to fuel you provide for miles
ness on the basis of all the facts and circumstances. driven outside the United States, Canada, and Mexico, see
Infrequent business use of the vehicle, such as for section 1.61-21(e)(3)(ii)(B) of the regulations.
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The value of any other service you provide for a vehicle a control employee as any highly compensated employee.
is not included in the cents-per-mile rate. Use the general A highly compensated employee for 2002 is an employee
valuation rule to value these services. who meets either of the following tests.
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4-year lease term. The annual lease values in the table Daily Lease Value
are based on a 4-year lease term. These values will gener-
ally stay the same for the period that begins with the first If you provide an automobile to an employee for a continu-
date you use this rule for the automobile and ends on ous period of less than 30 days, use the daily lease value
December 31 of the fourth full calendar year following that to figure its value. Figure the daily lease value by multiply-
date. ing the annual lease value by a fraction, using four times
Figure the annual lease value for each later 4-year the number of days of availability as the numerator and
period by determining the fair market value of the automo- 365 as the denominator.
bile on January 1 of the first year of the later 4-year period However, you can apply a prorated annual lease value
and selecting the amount in column 2 of the table that for a period of continuous availability of less than 30 days
corresponds to the appropriate dollar range in column 1. by treating the automobile as if it had been available for 30
days. Use a prorated annual lease value if it would result in
Using the special accounting rule. If you use the a lower valuation than applying the daily lease value to the
special accounting rule for fringe benefits discussed in shorter period of availability.
section 4, you can figure the annual lease value for each
later 4-year period at the beginning of the special account-
ing period that starts immediately before the January 1
date described in the previous paragraph. Unsafe Conditions Commuting
For example, assume that you use the special account-
ing rule and that, beginning on November 1, 2001, the
Rule
special accounting period is November 1 to October 31. Under this rule, the value of commuting transportation you
You elected to use the lease value rule as of January 1, provide a qualified employee solely because of unsafe
2002. You can refigure the annual lease value on Novem- conditions is $1.50 for a one-way commute (that is, from
ber 1, 2005, rather than on January 1, 2006. home to work or from work to home). This amount must be
included in the employee’s wages or reimbursed by the
Transferring an automobile from one employee to an- employee.
other. Unless the primary purpose of the transfer is to You can use the unsafe conditions commuting rule if all
reduce federal taxes, you can refigure the annual lease the following requirements are met.
value based on the fair market value of the automobile on
January 1 of the calendar year of transfer. 1) The employee would ordinarily walk or use public
However, if you use the special accounting rule for transportation for commuting.
fringe benefits discussed in section 4, you can refigure the 2) You have a written policy under which you do not
annual lease value (based on the fair market value of the provide the transportation for personal purposes
automobile) at the beginning of the special accounting other than commuting because of unsafe conditions.
period in which the transfer occurs.
3) The employee does not use the transportation for
personal purposes other than commuting because of
Prorated Annual Lease Value unsafe conditions.
If you provide an automobile to an employee for a continu- These requirements must be met on a trip-by-trip basis.
ous period of 30 or more days but less than an entire
calendar year, you can prorate the annual lease value. Commuting transportation. This is transportation to or
Figure the prorated annual lease value by multiplying the from work by any motorized wheeled vehicle (including an
annual lease value by a fraction, using the number of days automobile) manufactured for use on public streets, roads,
of availability as the numerator and 365 as the denomina- and highways. You or the employee must buy the transpor-
tor. tation from a party that is not related to you. If the employee
If you provide an automobile continuously for at least 30 buys it, you must reimburse the employee for its cost (for
days, but the period covers 2 calendar years (2 special example, cabfare) under a bona fide reimbursement ar-
accounting periods if you are using the special accounting rangement.
rule for fringe benefits discussed in section 4), you can use Qualified employee. A qualified employee for 2002 is
the prorated annual lease value or the daily lease value. one who:
If you have 20 or more automobiles, see section
1.61-21(d)(6) of the regulations. 1) Performs services during the year,
If an automobile is unavailable to the employee because 2) Is paid on an hourly basis,
of his or her personal reasons (for example, if the em-
ployee is on vacation), you cannot take into account the 3) Is not claimed under section 213(a)(1) of the Fair
periods of unavailability when you use a prorated annual Labor Standards Act of 1938 (as amended) to be
lease value. exempt from the minimum wage and maximum hour
provisions,
You cannot use a prorated annual lease value if
!
CAUTION
the reduction of federal tax is the main reason the
automobile is unavailable.
4) 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
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5) Receives pay of not more than $80,000 during the You must withhold the applicable income, social secur-
year. ity, and Medicare taxes on the date or dates you chose to
treat the benefits as paid. Deposit the amounts withheld as
However, an employee is not considered a qualified em-
discussed in section 11 of Circular E.
ployee if you do not comply with the recordkeeping require-
ments concerning the employee’s wages, hours, and other Amount of deposit. To estimate the amount of income
conditions and practices of employment under section tax withholding and employment taxes and to deposit it on
211(c) of the 1938 Act and the related regulations. time, make a reasonable estimate of the value of the fringe
benefits provided on the date or dates you chose to treat
Unsafe conditions. Unsafe conditions exist if, under the the benefits as paid. Determine the estimated deposit by
facts and circumstances, a reasonable person would con- figuring the amount you would have had to deposit if you
sider it unsafe for the employee to walk or use public had paid cash wages equal to the estimated value of the
transportation at the time of day the employee must com- fringe benefits and withheld taxes from those cash wages.
mute. One factor indicating whether it is unsafe is the Even if you do not know which employee will receive the
history of crime in the geographic area surrounding the fringe benefit on the date the deposit is due, you should
employee’s workplace or home at the time of day the follow this procedure.
employee commutes.
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
4. Rules for Withholding, be subject to a penalty.
If you overestimate the value of the fringe benefit and
Depositing, and Reporting overdeposit, you can either claim a refund or have the
overpayment applied to your next Form 941.
Use the following guidelines for withholding, depositing, If you deposited the required amount of taxes but with-
and reporting taxable noncash fringe benefits. held a lesser amount from the employee, you can recover
Valuation of fringe benefits. Generally, you must deter- from the employee the social security, Medicare, or income
mine the value of noncash fringe benefits no later than taxes you deposited on the employee’s behalf and in-
January 31 of the next year. Prior to January 31, you may cluded on the employee’s Form W-2. However, you must
reasonably estimate the value of the fringe benefits for recover the income taxes before April 1 of the following
purposes of withholding and depositing on time. year.
Choice of period for withholding, depositing, and re- Paying employee share of social security and Medi-
porting. For employment tax and withholding purposes, care taxes. If you choose to pay the employee’s social
you can treat fringe benefits (including personal use of security and Medicare taxes on fringe benefits without
employer-provided highway motor vehicles) as paid on a deducting them from pay, you must include the amount of
pay period, quarter, semiannual, annual, or other basis. the payments in the employee’s income. Also, if your
But the benefits must be treated as paid no less frequently employee leaves your employment and you have unpaid
than annually. You do not have to choose the same period and uncollected taxes for noncash benefits, you are still
for all employees. You can withhold more frequently for liable for these taxes. You must add the uncollected em-
some employees than for others. ployee share of social security and Medicare tax to the
You can change the period as often as you like as long employee’s wages. Follow the procedure discussed under
as you treat all the benefits provided in a calendar year as Employee’s Portion of Taxes Paid By Employer in sec-
paid no later than December 31 of the calendar year. tion 8 of Publication 15-A. Do not use withheld Federal
You can also treat the value of a single fringe benefit as income tax to pay the social security and Medicare tax.
paid on one or more dates in the same calendar year, even
if the employee receives the entire benefit at one time. For Special accounting rule. You can treat the value of ben-
example, if your employee receives a fringe benefit valued efits provided during the last 2 months of the calendar
at $1,000 in one pay period during 2002, you can treat it as year, or any shorter period within the last 2 months, as paid
made in four payments of $250, each in a different pay in the next year. Thus, the value of benefits actually pro-
period of 2002. You do not have to notify the IRS of the use vided in the last 2 months of 2001 would be treated as
of the periods discussed above. provided in 2002 together with the value of benefits pro-
Transfer of property. The above choice for reporting vided in the first 10 months of 2002. This does not mean
and withholding does not apply to a fringe benefit that is a that all benefits treated as paid during the last 2 months of
transfer of tangible or intangible personal property of a kind a calendar year can be deferred until the next year. Only
normally held for investment, or a transfer of real property. the value of benefits actually provided during the last 2
For this kind of fringe benefit, you must use the actual date months of the calendar year can be treated as paid in the
the property was transferred to the employee. next calendar year.
Limitation. The special accounting rule cannot be
Withholding and depositing taxes. You can add the
used, however, for a fringe benefit that is a transfer of
value of fringe benefits to regular wages for a payroll
tangible or intangible personal property of a kind normally
period and figure income tax withholding on the total. Or
held for investment, or a transfer of real property.
you can withhold Federal income tax on the value of fringe
benefits at the flat 27% rate applicable to supplemental Conformity rules. Use of the special accounting rule is
wages. optional. You can use the rule for some fringe benefits but
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not others. The period of use need not be the same for Include the value of the fringe benefit in box 1 of Form
each fringe benefit. However, if you use the rule for a W-2. Also include it in boxes 3 and 5 if applicable. You may
particular fringe benefit, you must use it for all employees show the total value of the fringe benefits provided in the
who receive that benefit. calendar year or other period in box 14 of Form W-2). If you
If you use the special accounting rule, your employee provided your employee with the use of a highway motor
also must use it for the same period as you use it. But your vehicle and included 100% of its annual lease value in the
employee cannot use the special accounting rule unless employee’s income, you must also report it separately in
you do. box 14 or provide it in a separate statement. If there is not
You do not have to notify the IRS if you use the special enough space on the Form W-2, you must report the value
accounting rule. You may also, for appropriate reasons, to the employee on a separate schedule so that the em-
change the period for which you use the rule without ployee can compute the value of any business use of the
notifying the IRS. But you must report the income and vehicle.
deposit the withheld taxes as required for the changed
period. If you use the special accounting rule, you must notify
the affected employees of the period in which you used it.
You must give the notice at or near the date you give the
Special rules for highway motor vehicles. If an em-
Form W-2 but not earlier than with the employee’s last
ployee uses the employer’s vehicle for personal purposes,
the value of that use must be determined by the employer paycheck of the calendar year.
and included in the employee’s wages. The value of the
personal use must be based on fair market value or one of
three special valuation rules: How To Get Forms and
• The automobile lease valuation rule. Publications
• The vehicle cents-per-mile rule.
• The commuting valuation rule (for commuting use Personal computer. You can access the IRS Web Site
only). 24 hours a day, 7 days a week at www.irs.gov to:
Election not to withhold income tax. You can choose • Download forms, instructions, and publications.
not to withhold income tax on the value of an employee’s • See answers to frequently asked tax questions.
personal use of a highway motor vehicle you provided. You
do not have to make this choice for all employees. You can • Search publications on-line by topic or keyword.
withhold income tax from the wages of some employees • Send us comments or request help by e-mail.
but not others. You must, however, withhold the applicable
social security and Medicare taxes on such benefits. • Sign up to receive local and national tax news by
e-mail.
You can choose not to withhold income tax by:
You can also reach us using file transfer protocol at
1) Notifying the employee as described below that you
ftp.irs.gov.
choose not to withhold and
2) Including the value of the benefits in boxes 1, 3, 5, CD-ROM. Order Pub. 1796, Federal Tax Products on
and 14 on a timely furnished Form W-2. For use of a
CD-ROM, and get:
separate statement in lieu of using box 14, see the
Instructions for Forms W-2 and W-3. • Current year forms, instructions, and publications.
The notice must be in writing and must be provided to • Prior year forms, instructions, and publications.
the employee by January 31 of the election year or within
30 days after a vehicle is first provided to the employee, • Frequently requested tax forms that may be filled in
whichever is later. This notice must be provided in a man- electronically, printed out for submission, and saved
ner reasonably expected to come to the attention of the for recordkeeping.
affected employee. For example, the notice may be mailed • The Internal Revenue Bulletin.
to the employee, included with a paycheck, or posted
where the employee could reasonably be expected to see Buy the CD-ROM on the Internet at www.irs.gov/
it. You can also change your election not to withhold at any
cdorders from the National Technical Information Service
time by notifying the employee in the same manner.
(NTIS) for $21 (no handling fee) or call 1-877-CDFORMS
(1-877-233-6767) toll free to buy the CD-ROM for $21
Amount to report on Forms 941 and W-2. The actual (plus a $5 handling fee).
value of fringe benefits provided during a calendar year (or
other period as explained under Special accounting rule
earlier) must be determined by January 31 of the following By phone and in person. You can order forms and publi-
year. You must report the actual value on Forms 941 and cations 24 hours a day, 7 days a week, by calling
W-2. If you choose, you can use a separate Form W-2 for 1-800-TAX-FORM (1-800-829-3676). You can also get
fringe benefits and any other benefit information. most forms and publications at your local IRS office.
Page 23
Page 24 of 24 of Publication 15-B 9:09 - 28-MAR-2002
The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.
Index
Page 24