As we previously summarized in an e-Alert on 2/6/18, the Tax Cuts and Jobs Act (TCJA) made significant changes in December 2017 that had tax implications for employer-provided fringe benefits.
What fringe benefits should employers need to know about:
Transit and Parking Programs: Employees will see no tax changes to these programs, but employers will no longer be able to deduct costs for subsidized or paid commuter benefits.
Qualified Bicycle Commuting Expenses: In 2017, up to $20 per month could be offered as a tax-free benefit for employees who regularly use a bike to travel to work. Tax-free reimbursement of bicycle expenses is suspended through 2025. Employers may still offer the benefit, but it will be taxable for federal, FICA and FUTA.
Qualified moving expense reimbursements: In 2017, moving expenses were an employee tax-free benefit. Effective for tax years beginning after December 31, 2017 and before January 1, 2016, the TCJA will no longer allow these expenses to be excludable from the employee’s gross income, with a few narrow exceptions.
Employee Achievement Awards: Currently, employee achievement awards that are deductible by an employer are excludable from an employee’s gross income, to a limited amount. Employee achievement awards are tangible personal property given in recognition of either length of service or safety achievement. Under the TCJA, there is a definition of ‘tangible personal property’ that may be considered a deductible employee achievement award. The ‘tangible personal property’ does NOT include cash, cash equivalents, gift cards, gift coupons, gift certificates (other than arranging for an employee to select from a limited array of pre-approved items), vacations, meals, lodging, theater or sports event tickets, stocks, bonds, other securities, or other similar items. This change is effective for amounts paid or incurred after 2017.
Voluntary Paid Family and Medical Leave Benefits: For tax years 2018 and 2019, at least, employers who offer paid family and medical leave may qualify for a tax credit of up to 25% of the annual wages paid to those employees. In order to claim the tax credit, there must be a written policy that provides to qualifying full-time employees, at least two weeks of paid family and medical leave, and must be offered to part-time employees, on a prorated basis.
Next steps for employers
Employers should review if any of these fringe benefits need to be reclassified as taxable wages. More information can be found here. If you have questions, please contact us. HR Knowledge payroll clients can contact their client account manager to confirm the tax set-up of these types of benefits or payments.
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