The standard mileage rate you can use under the cents-per-mile rule to value the personal use of a vehicle you provide to an employee in 2009 is 55 cents per mile. See Cents-Per-Mile Rule in section 3.

For 2009, the monthly exclusion for qualified parking increases to $230 and the monthly exclusion for commuter highway vehicle transportation and transit passes increases to $120. See Qualified Transportation Benefits on page 19.

After 2007, gross income of volunteer firefighters and emergency medical responders who are part of a qualified volunteer emergency response organization shall not include any qualified state and local tax benefit and any qualified payment. For more information, see Volunteer Firefighter and Emergency Medical Responder Benefits on page 20.

After 2008, qualified transportation fringe benefits include any qualified bicycle commuting reimbursement. For more information, see Qualified Transportation Benefits on page 19.

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This publication supplements Publication 15 (Circular E), Employer's Tax Guide, and Publication 15-A, Employer's Supplemental Tax Guide. It contains information for employers on the employment tax treatment of fringe benefits.

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A fringe benefit is a form of pay for the performance of services. For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work.

A person who performs services for you does not have to be your employee. A person may perform services for you as an independent contractor, partner, or director. Also, for fringe benefit purposes, treat a person who agrees not to perform services (such as under a covenant not to compete) as performing services.

You are the provider of a fringe benefit if it is provided for services performed for you. You may be the provider of the benefit even if it was actually furnished by another person. You are the provider of a fringe benefit your client or customer provides to your employee for services the employee performs for you.

The person who performs services for you is the recipient of a fringe benefit provided for those services. That person may be the recipient even if the benefit is provided to someone who did not perform services for you. For example, your employee may be the recipient of a fringe benefit you provide to a member of the employee's family.

Any fringe benefit you provide is taxable and must be included in the recipient's pay unless the law specifically excludes it. Section 2 discusses the exclusions that apply to certain fringe benefits. Any benefit not excluded under the rules discussed in section 2 is taxable.

You must include in a recipient's pay the amount by which the value of a fringe benefit is more than the sum of the following amounts.

• Any amount the law excludes from pay.
• Any amount the recipient paid for the benefit.

The rules used to determine the value of a fringe benefit are discussed in section 3.

If the recipient of a taxable fringe benefit is your employee, the benefit is subject to employment taxes and must be reported on Form W-2, Wage and Tax Statement. However, you can use special rules to withhold, deposit, and report the employment taxes. These rules are discussed in section 4.

If the recipient of a taxable fringe benefit is not your employee, the benefit is not subject to employment taxes. However, you may have to report the benefit on one of the following information returns.

If the recipient receives the benefit as:	Use:
An independent contractor	Form 1099-MISC
A partner	Schedule K-1 (Form 1065)

For more information, see the instructions for the forms listed above.

A cafeteria plan, including a flexible spending arrangement, is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable.

Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. However, a cafeteria plan can include a qualified 401(k) plan as a benefit. Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay.

A cafeteria plan can include the following benefits discussed in section 2.

• Accident and health benefits (but not Archer medical savings accounts (Archer MSAs) or long-term care insurance).
• Adoption assistance.
• Dependent care assistance.
• Group-term life insurance coverage (including costs that cannot be excluded from wages).
• Health savings accounts (HSAs). Distributions from an HSA may be used to pay eligible long-term care insurance premiums or qualified long-term care services.

A cafeteria plan cannot include the following benefits discussed in section 2.

• Archer MSAs. (See Accident and Health Benefits.)
• Athletic facilities.
• De minimis (minimal) benefits.
• Educational assistance.
• Employee discounts.
• Lodging on your business premises.
• Meals.
• Moving expense reimbursements.
• No-additional-cost services.
• Transportation (commuting) benefits.
• Tuition reduction.
• Working condition benefits.

It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education).

For these plans, treat the following individuals as employees.

• A current common-law employee (see section 2 in Publication 15 (Circular E) for more information).
• A full-time life insurance agent who is a current statutory employee.
• A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control.

Do not treat a 2% shareholder of an S corporation as an employee of the corporation for this purpose. A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power. Treat a 2% shareholder as you would a partner in a partnership for fringe benefit purposes, but do not treat the benefit as a reduction in distributions to the 2% shareholder.

If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. A plan you maintain under a collective bargaining agreement does not favor highly compensated employees.

A highly compensated employee for this purpose is any of the following employees.

1. An officer.
2. A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock.
3. An employee who is highly compensated based on the facts and circumstances.
4. A spouse or dependent of a person described in (1), (2), or (3).

If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. However, a plan you maintain under a collective bargaining agreement does not favor key employees.

A key employee during 2009 is generally an employee who is either of the following.

1. An officer having annual pay of more than $160,000.
2. An employee who for 2009 was either of the following.
   1. A 5% owner of your business.
   2. A 1% owner of your business whose annual pay was more than $150,000.

For more information about cafeteria plans, see section 125 of the Internal Revenue Code and its regulations.