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The Certified Payroll Professional Corner: Fringe Benefits

Christopher Wood, CPP  

Christopher Wood, CPP  

In this blog, we'll go over last edition's quiz question about employment taxes and talk about taxable and nontaxable fringe benefits with a quiz question on the topic.

Payroll’s biggest event. We attended American Payroll Association’s (APA) annual Congress in Las Vegas, Nevada. APA’s Congress was one of the year’s highest attended payroll conferences with nearly 100 workshops and almost as many vendors spending five days in the desert to talk about a variety of payroll topics and network with other payroll professionals. This is a community of professionals that can have a wide range of talents and skills. It’s a nice feeling to share, learn, and, yes, sometimes commiserate, over all things payroll.

Communication is key. One of the takeaways from this year’s event was just that – a feeling of community. We’re all in this together.  We’re not going through year-end alone (hopefully!). We can ask questions and learn; engage with other professionals and keep our knowledge current and correct.

That’s what we’re aiming for with these series quizzes. Creating a community, a safe space to share knowledge and information for professional development. Now, let’s go over the answer for the a previous edition of the CPP Corner on employment taxes and share this blog’s quiz question on fringe benefits.

Previous quiz answer. In a previous edition we asked, “What is the dollar threshold for determining if an employer makes employment tax deposits on a semiweekly or monthly basis?” The answer to this question was option b. “$50,000 or less for a monthly depositor; more than $50,000 for a semiweekly depositor.”

As we mentioned in the this edition, an employer’s deposit schedule for a calendar year is determined from the total taxes reported on Forms 941 (Employer’s Quarterly Federal Tax Return) in a four-quarter lookback period. The lookback period begins July 1 and ends June 30.

If an employer reported $50,000 or less of Form 941 taxes for the lookback period, the employer is a monthly schedule depositor; if the employer reported more than $50,000, the employer is a semiweekly schedule depositor.

Next-day deposit rule. There is one exception to these deposit schedules if the employer accumulates a tax liability of $100,000 or more on any day during a deposit period. This may happen around bonus time for some employers. Or when pay increases kick in. When this happens, the employer must deposit the tax by the close of the next business day, regardless of whether the employer is a monthly or semi-weekly depositor. And if the employer is a monthly depositor, that employer becomes a semi-weekly depositor.

More information on employment taxes, the lookback period, and deposit schedules can be found in Payroll Guide ¶4285.

New quiz question. On May 11 and 12, at the APA’s Congress, there were two hour-long workshops on taxable and nontaxable fringe benefits, conducted by Fred Basehore, Jr., CPP, Senior Director, Payroll and Compliance, Guidehouse.

An employee’s paycheck is comprised of more than federal, state and local taxes. Employers may offer benefits to employees. Some of these benefits are taxable and others are nontaxable. A fringe benefit is a form of pay for the performance of services, according to IRS Publication 15-B. An example might be when an employer allows an employee to use a business vehicle to commute to and from work.

Always taxable unless. Any fringe benefit you provide is taxable and must be included in the recipient’s pay unless the law specifically excludes it. And that’s the rub: there are nontaxable fringe benefits that are specified by law and the CPP exam will very likely ask about taxable and nontaxable fringe benefits.

During Basehore’s two workshops at APA’s Congress, he went over a number of different taxable and nontaxable fringe benefits. For this week, let’s look at nontaxable fringe benefits.

CPP exam question: Which of the following are considered nontaxable fringe benefits (choose any that apply)?

  1. Qualified transportation fringe benefits
  2. On premises athletic facilities
  3. Value of personal use of an employer-provided vehicle
  4. Group-term life insurance provided to employees up to $50,000
  5. Group-term life insurance provided to employees over $50,000
  6. Retirement planning services

Good luck! We’ll have the answer next edition with more information and a new CPP exam question.

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