February 21st, 2011 Amanda Han CPA (Taxloopholes.com Tax Strategist)
Fringe benefits are defined as compensation or other benefits received by an employee that are not in the form of cash.
The type of fringe benefit that we are most interested in are TAX FREE fringe benefits.
These Tax Free benefits may be excluded from the employee’s gross income and, therefore, are not subject to taxes. The best part is that employers can still take a tax deduction for these fringe benefits resulting in the best of both worlds: Business gets a tax deduction and employee does not pay taxes on the flip-side.
What this means for small business owners is the ability to shift money that would otherwise go to the IRS into tax free perks that you and your employees may enjoy!
Here are a dozen examples of Tax-Free Fringe Benefits that you may take advantage of as a business owner:
Gifts. Certain gifts to your employees can be excluded from the employee’s income and still be a tax deduction to you. Examples can include holiday gifts, occasional theater or sporting event tickets, flowers, fruit, or books. So instead of paying your employees bonuses, reward them with gifts instead and save taxes for you and your employees!
Achievement Awards. You can award your employees an item of “tangible personal property” (e.g., a trophy or plaque) for length of service or a safety achievement. As long as the award is given as part of a meaningful presentation and does not appear to be disguised compensation, you may be able to exclude up to $400 or $1,600 as tax free fringe benefits.
Retirement Planning Services. What greater gift than to help your employees plan for retirement? The money spent on retirement planning services for your employees and their spouses, which helps them prepare for retirement, may be a tax free fringe benefit to the employees.
Lodging and Meals on Your Business Premises. Instead of paying your employees more, consider providing lodging and meals for them instead to save taxes for you and your employees. The money you pay for your employee’s lodging and meals online pharmacies may be exempt from taxes if these benefits are provided for the employer’s convenience and is a necessary condition of employment.
Qualified Transportation Fringe Benefits. Some of the items that qualify for tax free benefits include transportation such as van transportation between the employee’s home and work, a transit pass, or parking. You can offer each employee up to $230 a month in tax free fringe benefits on qualified transportation which reduces your tax bill and is tax free to the employees. That equals up to $2,760 of tax free benefits per employee each year! Instead of paying for theses employee expenses directly, you may be able to simply reimburse your employees for these expenses with cash. What a great way to minimize income and payroll taxes for you and your employees!
Use of a Company Van for Commuting. This may also qualify as a tax-exempt benefit. As long as the van is a “highway vehicle” that seats at least six adults and that at least 80% of the vehicle’s mileage is used for:
On-Premises Gym. Research has shown that corporate fitness can significantly boost a Company’s productivity and profit. So why not take advantage of the tax free fringe benefits by providing a gym or workout place for your employees? You may provide an on-premises gym or other athletic facility TAX FREE for your employees, their spouses and their children!
Educational Assistance. Instead of paying bonuses this year, rewards your employees with the tools they need to succeed! In order for most businesses to succeed and thrive, employees may need to receive continuing education or additional training so they can help bring VALUE to the business. One of the best Tax Free fringe benefits offered by the IRS is that Companies can provide up to $5,250 in education assistance per employee and take a tax write-off for it. This means that you can pay up to $5,250 of education costs for each employee that will also be TAX FREE to the employees as well. What an amazing benefit that provides a win-win situation! You can save taxes, educate your employees, and improve your business!
Moving Expense Reimbursements. Let Uncle Sam help pay your employees to move. The costs incurred for your employees to move for their job may be a tax free fringe benefit also. So what types of moving expenses are tax free fringe benefits? Almost anything! Examples include packing, crating, transportation, insurance, shipping, storage, mileage, and lodging to name a few.
Payments or Reimbursements of Qualified Adoption Expenses. We just talked about having Uncle Sam pay for your business related moving expenses?.but how about having Uncle Sam pay for adoption expenses as well? Why not?he is our Uncle right? For 2011, you may deduct up to $13,170 per employee in qualified adoption expenses as a tax free fringe benefit. If you or your employee are excited about bringing home that bundle of joy?this tax perk probably just made your day even sweeter. Think of all the diapers you can buy with $13,170!
Accident and Health Benefits. Employers may contribute to an employee’s accident or health insurance plan as tax free fringe benefits. Items that qualify for tax free treatment include:
Group-Term Life Insurance. One of my favorite tax free fringe benefits is the Group-Term Life Insurance. You can provide up to $50,000 of group-term life insurance coverage per employee per year as tax free fringe benefits. Another tax deductible perk that may be Tax Free for you and your employees.
Take some time to think about which of these tax loopholes you can implement in your business to shift tax dollars into enjoyable personal perks.
Fringe benefits can not only help you to save business and personal taxes, but it can also be used as a retention and employee incentive tool. What’s not to like about the words TAX FREE?
The Taxloopholes.com Team!