WHAT IS IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits
The IRS Publication 15-B or the Employer's Tax Guide to Fringe Benefits is a document published by the Internal Revenue Service. The IRS Publication 15-B provides employers with guidance on how to account for fringe benefits when filing tax documents.
BREAKING DOWN IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits
IRS Publication 15-B or the Employer's Tax Guide to Fringe Benefits is a guide that employers use to learn how to file the fringe benefits they afford to their employees. Fringe benefits refer to non-cash benefits provided to persons who perform services for a business, and can include perks such as the use of a company car. For employees, the company will report the value of any fringe benefit on the employee's W-2. For non-employees, companies should report the value of benefits using Form 1099-MISC or Schedule K-1.
One of many guides the IRS publishes to help the taxpayer, IRS publication 15-B outlines taxes regarding fringe benefits. Fringe benefits offer additional compensation to employees above and beyond an agreed-upon wage or salary. Fringe benefits are generally tax-exempt, as long as certain conditions are met. Recipients of taxable fringe benefits have to include the fair market value of the benefit in their taxable income for the year.
The IRS generally considers fringe benefits taxable, but there are exceptions. The IRS considers some cafeteria plan benefits, typically those involving health care for employees, as pre-tax. Most fringe benefits that are income tax-exempt are also exempt from Social Security, Medicare and federal unemployment taxes, but not all. Adoption assistance is exempt from income tax only, for example. Fringe benefits commonly include health insurance, group-term life insurance coverage, educational assistance, child care and assistance reimbursement, cafeteria plans, employee discounts, employee stock options, personal use of a company-owned vehicle and others. Whether a fringe benefit is tax-exempt depends on the type and, in some cases, the value of the benefit. By default, the IRS taxes all fringe benefits unless they are specifically named as being tax-exempt. Accident and health benefits, commuting benefits, dependent care assistance, educational assistance, employee discounts, health savings accounts (HSA), and retirement planning services are some examples of fringe benefits the IRS considers tax-exempt.
What are fringe benefits worth?
In general, fringe benefits are valued at fair market value. This is the amount the employee would pay for the same benefit in a third-party, arms-length transaction. All relevant circumstances, such as geographic area and current market conditions, must be taken into account. The fair market value may be different from the actual cost to the employer of providing the benefit, but that does not effect the valuation.