Reimbursing employees and freelance workers for miles driven while in the field falls under "fringe benefits" for federal taxation purposes. Both employees and employers can benefit from a reimbursement program, although meticulous paperwork is necessary to maximize these benefits.
What is the mileage reimbursement rate for employees?
The employee must follow the accountable plan rules and account for the business miles driven. As of January 1, 2013, the standard mileage rate is 56.5 cents per mile. If the employer's reimbursement rate exceeds the standard rate, the excess amount is taxable to the employee as regular wages.
What is considered a fringe benefit?
Fringe benefits are perks and additions to normal compensation that companies give their employees, such as life insurance, tuition assistance, or employee discounts. If a fringe benefit is transferred as cash, such as a bonus or reimbursement for travel or other expenses, they are likely to be subject to income tax.
Is business travel considered a fringe benefit?
That is a great question. Any money paid or incurred with respect to a spouse, dependent, or other individual accompanying an employee on business travel is considered a taxable fringe benefit. However, there are some exceptions.
Is commuting a de minimis fringe benefit?
Assuming that this is an infrequent occurrence for that employee - generally happening no more than once a month, the commuting value of the trip is a nontaxable de minimis fringe benefit. However, if this tends to be a frequent occurrence, the commuting is taxable to the employee.
What are considered fringe benefits?
Some of the most common examples of fringe benefits are health insurance, workers' compensation, retirement plans, and family and medical leave. Less common fringe benefits might include paid vacation, meal subsidization, commuter benefits, and more.
Is travel reimbursement considered income?
As we mentioned, reimbursements for non-business travel, including commuting, is taxable, even if paid at or below, the Federal mileage rate and calculated on the same documentation as an accountable plan. This is considered regular wages and subject to all income and employment taxes.
Is travel considered a fringe benefit?
Fringe benefits For employees, travel expenses are typically considered a “working condition fringe benefit” and, therefore, not included in gross income.
What are three examples of excluded fringe benefits?
2. Fringe Benefit Exclusion RulesAccident and health benefits.Achievement awards.Adoption assistance.Athletic facilities.De minimis (minimal) benefits.Dependent care assistance.Educational assistance.Employee discounts.More items...•
Is mileage a taxable benefit?
A mileage allowance is money that you get from your employer after a business trip. If you do a lot of car-related travel for work, you may need to submit weekly or monthly mileage logs. Unlike a car allowance, the mileage allowance is not taxable.
Are reimbursed expenses taxable income?
If the employer does not have an accountable plan, then any reimbursements, even those that are ordinary and necessary, are taxable income.
What fringe benefits are not taxable?
Nontaxable fringe benefits can include adoption assistance, on-premises meals and athletic facilities, disability insurance, health insurance, and educational assistance.
Are Frequent Flyer Miles considered income?
Fortunately, frequent flyer miles are generally not taxable. The IRS has stated that they will not tax miles that are earned through travel with an airline or by using a credit or debit card because those miles are deemed nontaxable rebates.
How do you reimburse employees for travel expenses?
The IRS allows two basic options for reimbursing employees for deductible travel expenses: (1) employers can avoid paying employment tax by excluding reimbursement for travel expenses from employee wages under an accountable plan; or (2) employers can consider all payments to employees as wages under a non-accountable ...
Is cell phone reimbursement a fringe benefit?
When it comes to reimbursing employees or providing a monthly stipend for the use of their personal cellphones for business purposes, yes, this a non-taxable fringe benefit - provided that your reimbursement is reasonably calculated to actually reimburse the employees for the actual costs of maintaining the phone.
What is a reportable fringe benefit?
The reportable fringe benefit is the amount that appears on an employee's end of financial year payment summary. The reportable amount is the 'grossed-up' value of the fringe benefit. A grossed up value of both non-exempt and exempt employer fringe benefits totals will appear on the payment summary.
Is cell phone reimbursement a taxable benefit?
A cell phone reimbursement stipend, or a cell phone allowance, is a sum of money given to employees for them to purchase on their cell phone plans. Further details on what they are: Stipends are often given out monthly. To answer the question "are cell phone allowances taxable?" - no, it is a non-taxable benefit!
What is fringe benefit?
A fringe benefit is a form of pay for the performance of services. For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work.
When to figure lease value for fringe benefits?
If you use the special accounting rule for fringe benefits discussed in section 4, you can figure the annual lease value for each later 4-year period at the beginning of the special accounting period that starts immediately before the January 1 date described in the previous paragraph .
How much can you exclude from your taxes?
You can generally exclude the cost of up to $50,000 of group-term life insurance coverage from the wages of an insured employee. You can exclude the same amount from the employee's wages when figuring social security and Medicare taxes. In addition, you don't have to withhold federal income tax or pay FUTA tax on any group-term life insurance you provide to an employee.
What is the exclusion for accident and health benefits?
The exclusion for accident and health benefits applies to amounts you pay to maintain medical coverage for a current or former employee under the Combined Omnibus Budget Reconciliation Act of 1986 (COBRA). The exclusion applies regardless of the length of employment, whether you directly pay the premiums or reimburse the former employee for premiums paid, and whether the employee's separation is permanent or temporary.
When will the cents per mile rule be implemented?
Due solely to the COVID-19 pandemic, if certain requirements are satisfied, employers and employees that are using the lease value rule may instead use the cents-per-mile rule for 2020 to determine the value of an employee's personal use of an employer-provided vehicle beginning as of March 13, 2020.
Do you furnish meals for convenience?
This is true even if a law or an employment contract provides that the meals are furnished as pay. However, a written statement that the meals are furnished for your convenience isn't sufficient.
Can you furnish lodging for your convenience?
Whether or not you furnish lodging for your convenience as an employer depends on all the facts and circumstances. You furnish the lodging to your employee for your convenience if you do this for a substantial business reason other than to provide the employee with additional pay. This is true even if a law or an employment contract provides that the lodging is furnished as pay. However, a written statement that the lodging is furnished for your convenience isn't sufficient.
What is standard mileage rate?
The standard mileage rate is established by the IRS , and the nontaxable amount that is used by employers to reimburse employees for the business use of their personal automobiles. This is the reimbursement rate most families use to reimburse the nanny or housekeeper who uses her personal vehicle to perform her job.
Do you have to have a written plan for tax free educational assistance?
According to the IRS, “Employers offering tax- free educational assistance are required to have a written plan describing the benefit and the terms under which it is available.” (Notice 97-60 Exclusion For Employer-Provided Educational Assistance). Translation: put it in writing in your written work agreement.
Can an employer pay for health insurance?
Insurance Benefits: The IRS will allow the employer to pay the cost of an medical or health insurance plan for employees, including an employee’s spouse and dependents. Depending on circumstances the premium payments can be excluded from wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding.
Can an employer pay for training?
An employer may pay for any form of instruction or training that improves or develops an individual’s capabilities, whether or not job-related or part of a degree program under a qualified education assistance program without defeating the non-taxable status of the benefit supplied to the employee. MORE INFORMATION.
Does a nanny's mileage include commuting?
It does not include the nanny’s commuting mileage to/from her home to her place of employment. Nanny mileage reimbursement is tax free except for values that exceed the IRS rates. Mileage Pad makes a free app available to help employees accurately track business mileage for employer reimbursement.
