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taxmap/pubs/p15b-000.htm#en_us_publink1000193614
Publication 15-B

Employer's Tax Guide to Fringe 
Benefits


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What's New(p1)


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Cents-per-mile rule.(p1)

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 2010 is 50 cents per mile. See Cents-Per-Mile Rule in section 3.

Reminders(p2)


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Photographs of missing children.(p2)

The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

taxmap/pubs/p15b-000.htm#TXMP63a03118Introduction

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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Comments and suggestions.(p2)


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We welcome your comments about this publication and your suggestions for future editions.
You can write to us at the following address:

 
Internal Revenue Service 
Business Forms and Publications Branch 
SE:W:CAR:MP:T:B 
1111 Constitution Ave. NW, IR-6526 
Washington, DC 20224


We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.
You can email us at *taxforms@irs.gov. (The asterisk must be included in the address.) Please put "Publications Comment" on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.
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1. Fringe Benefit Overview(p2)


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previous topic occurrence Fringe Benefit next topic occurrence

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.
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Performance of services.(p2)


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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.
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Provider of benefit.(p2)


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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.
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Recipient of benefit.(p2)


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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.
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Are Fringe Benefits Taxable?(p2)


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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.
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Including taxable benefits in pay.(p2)


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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. 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 contractorForm 1099-MISC
A partnerSchedule K-1 (Form 1065)
For more information, see the instructions for the forms listed above.
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Cafeteria Plans(p2)


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previous topic occurrence Flexible Spending Arrangement next topic occurrence

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.
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Qualified benefits.(p3)


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A cafeteria plan can include the following benefits discussed in section 2.
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Benefits not allowed.(p3)


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A cafeteria plan cannot include the following benefits discussed in section 2.
It also cannot include scholarships or fellowships (discussed in Publication 970, Tax Benefits for Education).
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Employee.(p3)


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For these plans, treat the following individuals as employees.
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Exception for S corporation shareholders.(p3)
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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.
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Plans that favor highly compensated employees.(p3)


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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).
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Plans that favor key employees.(p3)


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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 2010 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 2010 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.
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More information.(p4)


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