Chapter 13

Qualified Plan Award

-Employee achievement award given as part of: employer's written plan; doesn't discriminate in favor of highly compensated employees

de minimis benefits included

-Occasional typing of personal letters by a secretary hired by an employer; -Occasional personal use of an employer's copying machine, providing that the employer exercises sufficient control and imposes significant restrictions on the personal use of the machine so that at least 85% of the use of the machine is for business purposes; -Occasional cocktail parties, group meals, or picnics for the employees and their guests; -Traditional birthday or holiday gifts or property (not cash) with a low fair market value; -Occasional theater or sporting event tickets; -Coffee, donuts, or soft drinks; -Local telephone calls; and -Flowers, fruit, or books, or similar property provided to employees under special circumstances (i.e., on account of illness, outstanding performance or family crisis).

Dependent Care Assistance

-Qualifying Persons: dependent children under 13; dependent children incapable caring for themselves; spouse incapable caring for themselves -must allow employee to work -plan must provide advance notice -up to $5,000 ($2,500 MFS) may be excluded from employee gross income- but no more than earned income of employee or spouse

Qualified Transportation and Parking

-an employee may exclude the value of transportation benefits provided by his employer from his gross income -transportation benefits: $245/month for commuter pass or $245/month for parking pass -provision may be discriminatory

De Minimis Fringe Benefits

-any property or service provided to employee by employer that is so small that it makes accounting unreasonable -generally excludable from employee gross income -de minimis meals -de minimis transportation -if not de minimis benefit, may still be excludable if fall under other excludable benefits (ex. meals furnished for convenience of employer -may be discriminatory

Working Condition Fringe Benefits

-any property or service provided to employee that enables employee to preform his work -if paid for by the employee would be deductible as a trade or business expense -ex) company car, hotel, travel -value of working condition fringe benefits excluded from an employee's gross income- only amount of fringe benefit used for business purposes is excluded (ex. business use of company car) -may be discriminatory

Nondiscrimination

-based on nondiscriminatory basis (ex. not just highly compensated employees) -exclusions are lost if fringe benefit is provided on discriminatory basis- must be included in employee's taxable income

Qualified Move

-distance between new job location and old home must be at least 50 miles greater in distance -employee needs to be either: full-time in the new location for at least 39 weeks (within 1 year of move) or; full-time or self-employed in new location for at least 78 weeks (within 2 yrs. of move)

Adoption Assistance Programs

-employee can exclude from his gross income for qualified adoption expenses -program must be in writing -Exclusion limited to: $12,970/child; phase out begins with AGI exceeds $194,580

Qualified Tuition Reduction Plans

-employee may exclude from gross income amount representing tuition reduction -reduction in tuition provided to employee of educational institution for education (generally only for education below graduate level; employee, spouse, or dependent children may be eligible)

Fringe benefits

-employee provides services to employer in exchange for compensation -dictionary: an outer edge, margin, periphery -"additional" compensation from benefits other than customary wages provided to an employee for the performance of services for an employer

Lease Value Rule

-employer purchased vehicle: look up "annual lease value" in annual lease table (use FMV vehicle on day 1st available to employee); annual lease values generally distributed based on the days the vehicle was available during year -employer leased vehicle: valuation primarily based on either invoice price, suggested retail price, or nationally recognized retail value (ex. Kelley Blue Book) -Amount included in employee gross income= annual lease value * % personal use (unless De Minimis)

Educational Assistance Programs

-employer's payment of expenses incurred on behalf of an employee for education or -the employer's provision (provide) of education to an employee -up to $5,250 may be excluded from employee's gross income- may be able to be excluded as "working condition benefit"; no exclusion if employee given choice of cash or educational assistance

Valuation Rules Applying to Fringe Benefits

-general rule: fair market value of fringe benefit -special valuation for employer-provided vehicle: 1. cent per mile rule or, 2. commuting rule or, 3. lease value rule (the employee is using the employer vehicle, so this is taken out of their income)

Commuting Rule

-generally employer must have written policy that requires vehicle to be used only for commuting (unless De Minimis personal use) -amount included in gross income= $1.50 * each one way commute

Qualified Moving Expense Reimbursement

-if an employer reimburses an employee for "qualifying moving expenses" the employee can exclude the reimbursement from his gross income -moving expenses: expenses related to a qualifying move; deductible moving expense

Loding

-lodging provided to employee is excluded from his taxable income if: 1. furnished for convenience of employer and 2. furnished on employer's business premises and 3. employee required to accept lodging as condition of employment

Examples of fringe benefit

-meals and lodging furnished for the convenience of the employer -athletic facilities furnished by the employer -educational assistance programs -dependent care assistance programs -no additional cost service -qualified employee discounts -working condition fringe benefits -qualified tuition reduction plan -de minimis fringe benefits (using copy machine, eat snacks, holiday gifts, etc.) -qualified moving expense reimbursement -qualified transportation and parking -adoption assistance programs -prizes and awards

Meals

-provided to employee for the benefit of employer: doesn't include cash payments for meals (generally taxable to employee) -value of meal excludable from employee's gross income if meals are furnished: 1. for convenience of employer and 2. employer's business premises

Deductible Moving Expenses

-reasonable expenses: 1. moving household good and personal effects from old house to new (moving company-actual expenses, yourself-actual expense (gas/oil) or 24cents/mile) 2. traveling and associate lodging during the move (traveling-actual expense (gas/oil) or 24cents/mile; lodging- actual expense) nondeductible moving expense: -temp. living expenses -meals while in-route -storage costs (other than in-transit) -pre-house hunting costs -costs incurred to purchase new home or sell previous home

No additional Cost service

-services provided by employer that don't cause employer to incur any substantial additional cost or loss of revenue -services/product must be offered to customers in the ordinary course of business -lost or foregone revenue is considered a cost and wouldn't be considered a "no additional cost service" -ex.) airline tickets; hotel reservations; movie theater

taxation of fringe benefits

-taxable as wages to employee (unless specified by IRC provision or employee pays FMV for benefit) -taxable deduction for the employer- deductible as "compensation expense" unless fringe benefit not taxable to employee (if not c.e. then still may be able to deduct as ordinary and necessary business expense)- withholding for federal/state/payroll taxes may be required

Cents per Mile rule

-to use this rule, must use vehicle regularly for business (including commuting pool with 3 or more employees) -amount included in employee gross income= 56.5cents/mile * personal mileage

Awards and Prizes

-value of "achievement awards" given to employees may be excluded from the employee's gross income -achievement awards: length of service or safety awards, presentation awards -limited to: $400/taxable year for nonqualified plan awards and $1600/taxable year for all qualified plan awards -cash awards included in employee's gross income

Qualified Employee Discounts

-value of employee discounts is excluded from an employee's gross income -discount exclusion doesn't apply to real property or investment property -must be offered in ordinary course of business -exclusion limit: service- 20% of the price of service to nonemployee customers and product- employer's gross profit % multiplied by the price the employer chargers nonemployee customers

athletic facilities furnished by the employer

-value of on-premise athletic facilities provided by an employer to an employee not included in employee's gross income if: 1. operated by employer and 2. located on the employer's business premises and 3. substantially all of the use of facility is by employees, spouses, dependent children (may be discriminatory)