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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 20, 2009. 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 20, 2009

  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 accurate 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 • Your supervisor is responsible to make sure other divisions are cooperative

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

  7. Meals • Overnight travel – not taxable • Conference or Official Business Meeting – not taxable • “For the Convenience of the Employer” – not taxable but has specific rules to qualify.

  8. Meals • Otherwise – Taxable and Reportable • May be defined in CBA • Lunch when you work offsite or go to training • Breakfast when you are called out to work early • Dinner if you work late

  9. 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.

  10. 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”.

  11. 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.

  12. 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.

  13. 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”.

  14. 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.

  15. 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.

  16. Domestic Partner Insurance • Beginning in tax year 2009, employees may declare their partner to be a dependent for tax purposes. That will eliminate the use of the DPT transaction and the value of the insurance will not be considered a taxable fringe benefit. • See updated OSPA data entry guide for PEBB – Domestic Partner.

  17. 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.

  18. 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.

  19. 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.

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

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

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