E-8-13 Taxable Fringe Benefits

I. Purpose

To provide guidance to University departments and staff of their responsibility to notify Payroll Services of taxable fringe benefits provided to employees and to facilitate proper withholding and reporting of payroll taxes.    

II. Policy

The University must comply with IRS regulations which consider all compensation paid to, or on behalf, of an employee as taxable unless specifically excluded by IRS code. Fringe benefits are a form of pay, by way of property, service, gift certificates, cash or cash equivalent.  

III. Definitions

• Apparel/clothing allowance benefit: Value of merchandise credit that allows certain employees to buy clothes and goods from an outside vendor.
• Athletic tickets benefit: Value of season tickets provided for which there is no University business purpose. 
• Automobile benefit: Value of personal use of a University provided vehicle.
• Club membership benefit: Value of University paid club memberships and related expenditures for which there is no University business purpose.
• Cash Equivalents benefit: Includes gift cards or gift certificates and is considered taxable income to the employee regardless of the value.
• Housing benefit: Market value of University provided housing or payment of housing costs where housing is determined to be a personal benefit.
• Specifically excluded benefits:
  • Awards for length of service and safety achievement (See BPM E-7-12) 
  • Contributions by employers to accident and health plans
  • Educational assistance programs
  • Group term life insurance coverage up to $50,000
  • Meals or lodging furnished for convenience of employer
  • Qualified tuition reduction
• Travel reimbursements: Travel reimbursements are not considered to be in compliance with the accountable plan reasonable time rule when the traveler fails to sign or approve the reimbursement request within 60 calendar days of the end of business travel and, therefore, is considered taxable income to the employee.
• Working condition fringe benefit: Any property or service provided by an employer that, if paid by the employee, would be deductible as a trade or business expense under IRC Section 162. The value of the working condition benefit is excludable from an employee’s income. To qualify as a working condition benefit, the benefit received by the employee must be related to the employee’s duties at the University. The business use of an employer-provided vehicle qualifies as a working condition fringe benefit as does the payment of work related professional licenses and certifications. In order for an expense to be excludable from compensation income as a working condition fringe benefit, they must be:
  • A Bona fide business expense
  • Sufficiently documented

IV. Responsibilities 

1. Employee
   1. Acknowledge receipt of department provided fringe benefit through signature on the Taxable Fringe Benefit form when provided by department. 
2. Payroll Administrators
   1. Adhere to BPM E-7-12 regarding employee awards and gifts. 
   2. Report any taxable fringe benefits provided by department to an employee, employee relative or dependent to the Payroll Services Director or Assistant Director within five business days of employee receiving benefit.  
   3. Contact Payroll Services Director or Assistant Director to determine the taxability of a fringe benefit in advance of providing to employee. 
3. Payroll Services
   1. Provide guidance to department payroll administrators on taxability of fringe benefits.
   2. Coordinate with central offices for certain University provided fringe benefits such as Health and Wellness incentives, tuition waiver for graduate level program exceeding tuition benefit limits, and season athletic tickets. 
   3. Process the fringe benefit amount as inclusion in the employee’s gross pay during the next payroll cycle. 

V. Procedures

1. Department payroll administrators should initiate Taxable Fringe Benefit form for each employee, spouse or dependent of department provided fringe benefit. 
2. Employee should sign the form to acknowledge receipt of benefit. 
3. Departments must submit the completed form(s) to Payroll Services located at 340 Peterson Service Building within five business days of employee, spouse or dependent receiving the fringe benefit.
4. Payroll Services will process the fringe benefit amount for the inclusion in the employee’s gross pay during the next payroll cycle. Any forms received for separated employees after last paycheck will be handled as adjustment to the calendar year reported W2 and any payroll taxes charged to the department.