Income - Taxation of Employee Benefits

Question 1

What are common types of fringe benefits that can be excluded from an employee’s income?

Answer 1

1. Meals and lodging for convenience of employer;
2. Working condition expenses;
3. De minimus fringes;
4. No additional cost fringes;
5. Employee discounts;
6. Employee gifts (under $25);
7. Safety/achievement awards.

Question 2

Define the “working condition benefit.”

Answer 2

A benefit provided by the employer that would be deductible if the employee had instead paid the expense, excluded from income if reimbursed by employer.

Question 3

Under what circumstances are health insurance proceeds excluded from income?

Answer 3

1. Excluded if taxpayer paid premiums;

2. Excluded if employer paid premiums and reimbursement is for qualified medical expenses.

Question 4

What insurance premiums paid for employees are excludible from the employee’s income?

Answer 4

1. Group term life insurance up to $50,000 of coverage.
2. Health insurance premiums.
3. Disability insurance premiums.

Question 5

A tax payer can generally exclude the value of an employee discount that an employer provides an employee from the employee’s wages, up to what limits?

Answer 5

1. 20% of value of services;

2. Average gross profit percentage for goods.