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OSPS Year-End Training Taxable Fringe Benefits and Tax Forms

OSPS Year-End Training Taxable Fringe Benefits and Tax Forms . Presented by: Sharon McKeehan Date: October 19, 2010. What Is A Taxable Fringe Benefit?.

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OSPS Year-End Training Taxable Fringe Benefits and Tax Forms

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  1. OSPS Year-End TrainingTaxable Fringe Benefitsand Tax Forms Presented by: Sharon McKeehan Date: October 19, 2010

  2. What Is A Taxable Fringe Benefit? • The IRS says a fringe benefit is a form of pay for the performance of services (employer gives to employee), which includes property, services, cash or cash equivalents. • A Taxable Fringe Benefit is included in gross income and reported on form W-2 unless specifically excluded under an IRS code section.

  3. WHY DO WE CARE? • The employer is responsible for proper classification and reporting • Classification = taxable or non-taxable • Reporting = included on the W-2 • Gets to the W-2 by way of payroll entries

  4. WHY DO WE CARE? • Getting it right the first time • Employee’s W-2 is correct • No audit findings • Employee able to file taxes • Accurately • Without Delay • No Amended Return

  5. WHY DO WE CARE? • Not just a ‘year-end’ issue, but important to ensure accuracy at year-end. • Should monitor all year for correct capture, classification and processing of taxable and non-taxable fringe benefits. • Do your final check at year-end • This responsibility falls to payroll to ensure accuracy. • Make it known that you need accurate and timely information from your agency accounts payable section.

  6. Common Transactions • Meals • Moving Expenses • Use of State Vehicle • Educational Expense • Domestic Partner Insurance

  7. Meals • Taxable and reportable if there is no overnight travel • Conference or Official Business Meeting – not taxable • “For the Convenience of the Employer” – not taxable but has specific rules to qualify.

  8. Meals • Two Ways To Process • Reimburse through OSPA using code MST – pays cash and adds to taxable earnings. Adds amount to gross pay and reports out on Box 1 of the W-2. • Record through OSPA using code MS – non-cash transaction that adds to taxable earnings. Use when the meal was paid through accounts payable.

  9. Moving Expenses • The non-taxable portion is the cost to move the goods and the people. Includes mileage and lodging but NOT meals. • Report through OSPA using code MVN (cash payment) Amount is reported in Box 12 on the W-2 and referenced with a code “P”.

  10. Moving Expenses • Everything else is taxable. • Report through OSPA using code MVT (cash payment). Adds amount to gross pay and reports out on Box 1 of the W-2. • If payments made via accounts payable or to a third party, you must still record in OSPA and set up opposing PANN entries.

  11. Use of State Vehicle • There is very little permission in statute for use of a state vehicle • Generally relates to a state vehicle being garaged at home. • The taxable portion may be: • Commute to work value of $1.50 per way – non-cash code SVN • Cents per mile commute to work – non-cash code SMN • Either of these will be added to gross pay and reported on Box 1 of the W-2.

  12. Educational Expense • Educational payments can either paid or recorded through OSPA. • OAM 50.10.00.PO & PR updated July 2009 to provide more flexibility for making payments, and provides more clarity about the difference between “educational expense reimbursements” and an “educational assistance program”.

  13. Educational Expense • Educational expenses must be classified as taxable or non-taxable according to rules in IRC 127 and IRC 132 • Code EDN is used for non-taxable payments • Code EDT is used for taxable payments • Taxable payments are included in gross pay and will report on Box 1 of the W-2.

  14. Domestic Partner Insurance • Reporting the fair market value of the partner insurance using code DPT will result in the amount being added to gross pay as a non-cash transaction and reported in Box 1 of the W-2. • No DPT entry for those who claim their partner as a dependent for tax purposes.

  15. Non Taxable Under an ACCOUNTABLE PLAN • There is a business connection to the expenditure or the reimbursement is for expenses that would be an allowable deduction for the employee on the employee’s tax returns.

  16. Non Taxable Under an ACCOUNTABLE PLAN • The employee is required to provide “adequate” accounting for the expenditure (s) within a reasonable amount of time. The employee must submit receipts unless under a per diem plan.

  17. Non Taxable Under an ACCOUNTABLE PLAN • The employee is required to return excess reimbursements or advances within a reasonable time. If the policy meets all three criteria, the reimbursements are non-taxable to the employee.

  18. COMMON TRANSACTIONS • Uniforms • Special Boots or Shoes • Safety Equipment • Tool Allowance

  19. Affordable Health Care Act • No changes for tax year 2010 • Insurance coverage for older children remains tax-free to the employee. • Requirement to report value of health insurance has been delayed until 2012. Reporting in 2011 is “optional” • Will be in Box 12

  20. Questions? • Contact Sharon McKeehan Sharon.e.mckeehan@state.or.us 503-378-6777 x230

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