With the end of the year approaching, it is time to consider the reporting requirements related to taxable fringe benefits that you provide to your employees. If you answer yes to any of the following questions, please share this information with the person who handles your payroll:
- Do you pay health insurance premiums on behalf of any 2% or greater shareholders? (S Corporations only)?
- Do you provide company cars to any of your employees (owned or leased)? If yes, do the employees use the company cars for personal use? (Personal use includes commuting to and from work.)
- Do you provide Group-term Life Insurance in excess of $50,000 to any of your employees?
- Do you provide Group-term Life Insurance to non-employees (such as a spouse or dependent of employee)?
Health Insurance Premiums
Health insurance premiums paid on behalf of any 2% or greater shareholders are deductible by the S Corporation and included in the wages of the S Corporation shareholder. Provided the premiums are included in the wages (form W-2, Box 1, Federal wages only) of the S Corporation shareholder, the shareholder may deduct the cost of the premiums on their individual tax return. The premiums are not subject to social security or Medicare taxes and are not taxable for Pennsylvania or local tax purposes.
Personal Use of Company Owned Vehicles
Click here for the Vehicle Information Summary sheet, which must be filled out by each employee using company-owned vehicles for personal use. The vehicle information should be provided for the period November 1, 2012 through October 31, 2013. Please inform us if you have elected not to withhold federal income tax from these fringe benefits. Note that this election had to be made by January 31, 2013.
Group-Term Life Insurance
Click here for the Group Term Life Insurance Summary Sheet.
The premium value of employer-provided Group-term Life Insurance in excess of $50,000 is subject to Social Security/Medicare taxes and is required to be reported at least once a year as gross wages. You should be able to obtain the value subject to tax for these employees from your insurance company.
In addition, the cost of Group-term Life Insurance coverage on the life of a non-employee (spouse or dependent of the employee) in excess of $2,000 is taxable to the employee and should be included in gross wages. You should be able to obtain the value subject to tax for these employees from your insurance company.
Please return this info to your tax provider to calculate and report the fringe benefit value and the corresponding payroll taxes to be withheld from your employees’ wages before the end of this year.
If you use an outside payroll service for processing your payroll, we would like to remind you that these services must receive the information by the first week of December.
Questions about employer-provided fringe benefits? Contact your RKL tax advisor.