Fringe Benefits That May Affect Your Payroll Reporting and Tax Withholding

To Our Business Clients:

Attached for your convenience is a summary of the tax treatment of certain fringe benefits for payroll tax and income tax reporting purposes, plus detailed information regarding company automobiles and health and accident insurance premiums for S corporations.

If any of these items apply to your company, please provide a copy to the person responsible for overseeing your payroll tax operations.  Please don’t hesitate to call us if you have any questions.

Attachment

Updated in January 2021 to reflect the following: 

For the 2020 calendar year, the IRS has issued Notice 2021-7 to provide temporary relief for those employers and employees using the automobile lease valuation rule.   Due to the COVID-19 pandemic, under many circumstances, employers may find that the automobile lease valuation rule may result in a higher addback to the employee’s wages than is warranted.  Relief from this result is granted by allowing employers who are required to use the automobile lease valuation by applying the rule up to March 13, 2020. Then for the period after March 13, 2020, the employer may apply the vehicle cents- per –mile rule for purposes of determining the personal use of an employer-provided automobile. Employers in the next tax year beginning in 2021 will then revert back to the automobile lease valuation rule. This relief is available to those employers who at the beginning of the 2020 year reasonably expected that the employee would use the company automobile with a fair market value not exceeding $50,400 to be used regularly for its trade or business but was unable due to the COVID-19 pandemic.