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Benefits

IRS FAQs Address Tax Treatment of Work-Life Referral Services

EBIA  

· 5 minute read

EBIA  

· 5 minute read

IRS FS-2024-13: Frequently asked questions about work-life referral services (Apr. 2024)

Available at https://www.irs.gov/newsroom/frequently-asked-questions-about-work-life-referral-services

The IRS has released guidance on the tax treatment of work-life referral services in the form of frequently asked questions. In general, work-life referral services are employer funded benefits to assist employees in finding resources and support for personal, work, or family challenges through informational and referral consultations. These benefits are typically integrated into an employee assistance program or bundled with other employer services, and encompass a wide range of employee support, including guidance on accessing child and elder care, health care, and financial and legal services, as well as assistance with related paperwork and administrative tasks. Employers often engage third-party providers for work-life referral services, paying a monthly fee per eligible employee irrespective of individual usage rates.

The IRS provides that, for tax purposes, work-life referral services are treated as de minimis fringe benefits and, therefore, are excluded from income and are exempt from employment taxes (FICA, FUTA, and income tax withholding). In general, a de minimis fringe benefit is a small and infrequent perk that is impractical to account for due to its minimal value and rare occurrence.

EBIA Comment: The IRS appears to take the position that work-life referral service benefits are treated as de minimis fringe benefits because they are used infrequently by employees and only when an employee faces one of the challenges the programs are designed to address. The guidance notes that because the FAQs have not been published in the Internal Revenue Bulletin, the IRS will not rely on them to resolve a case, and also warns that if an FAQ provides an inaccurate statement of the law, the law will control. For more information, see EBIA’s Fringe Benefits manual at Section VII (“De Minimis Fringe Benefits”).

 

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