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Fringe benefits

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Fringe benefits

  1. 1. Fringe benefits: concept and tax consequences Gulbanu Duisenbekova Aigul Kalikhanova
  2. 2. A fringe benefit is a form of pay(including property, services, cash or cash equivalent) in addition to stated pay for the performance of services.
  3. 3. Fringe benefit examplesan employer-providedvehiclegroup healthinsuranceEmployee discounts
  4. 4. Why do employers offer fringe benefits?Group health plansEmployee receivingbenefits
  5. 5. Fringe benefits could be :TaxableNontaxable (excludable)Partially taxableTax-deferred
  6. 6. Classification of fringe benefitsFor Employment SecurityFor Health ProtectionFor Old Age and RetirementFor Personnel Identification, Participationand Stimulation
  7. 7. Fringe benefits are categorized asPayment for Time Not workedExtra Pay for time Worked
  8. 8. Calculation Calculating fringe benefit tax- Single rate (formerly Flat Rate)- Alternate rate (formerly multi-rate )- Rates of fringe benefit tax
  9. 9. Reporting of Taxable Fringe Benefits Fringe benefits>$ 2000 Reportable fringe benefitsIncluded on employees payment summaryShown on employees tax return
  10. 10. Tax consequences RetirementEmployee’s compensation employees’ taxable income
  11. 11. Group term life insuranceProvided by employers Additional taxes deducted from employee’s paychecks =>Additional income
  12. 12. Tax consequences in BusinessUnsubstantiated Business ExpensesReimbursement may have unexpected taxconsequences.Moving Expense Reimbursementexpenses may be deductible yet excluded fromwages in certain situations
  13. 13. E.g:-Employer consequences: The moving expensesare deductible and are not treated as wages.- Employee consequences: The movingexpense reimbursement is nontaxable but themoving expenses are not deductible.
  14. 14. ReferencesLeibowitzA., (1983), Fringe Benefits in in EmployeeLeibowitz A., (1983), Fringe Benefits Employee Compensation. .from Compensation from http://www.nber.org/chapters/c7385.pdf http://www.nber.org/chapters/c7385.pdfMONEY MANAGEMENT (2003), fromMONEY MANAGEMENT (2003), from http://www.lifetimefp.net/Advice110301.htm http://www.lifetimefp.net/Advice110301.htmRobert W Ditmer (January, 2010),Taxation of of GroupRobert W Ditmer (January, 2010),Taxation Group Term Life Insurance. From http://suite101.com/article/taxation- Term Life Insurance. From of-group-term-life-insurance-a188109 http://suite101.com/article/taxation-of-group-term-Taxable Fringe Benefit Guide (January, 2012), from life-insurance-a188109Taxable Fringe Benefit Guide (January, 2012), from http://www.irs.gov/pub/irs-tege/fringe_benefit_fslg.pdf http://www.irs.gov/pub/irs- tege/fringe_benefit_fslg.pdf
  15. 15. Questions

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