The IRS has recently updated its Publication 15-B, Employer’s Tax Guide to Fringe Benefits, for use in 2017. The 2017 version of Publication 15-B is similar to the 2016 version, but it has some notable clarifications and additions, including benefits that cannot be excluded from the employee’s W-2 as nontaxable de minimis fringe benefits.
What is a nontaxable de minimis fringe benefit?
A nontaxable de minimis fringe benefit is a benefit that is received by the employee and is excludable from the employee’s taxable wages (W-2) because the property or service received has a value so small that accounting for it is unreasonable or administratively impracticable. This takes into account the frequency with which similar fringe benefits are provided by the employer to its employees.
The latest version of the Publication lists examples of nontaxable de minimis fringes, including:
- Personal use of an employer-provided cell phone provided primarily for noncompensatory business purposes;
- Occasional cocktail parties, group meals, or picnics for employees and their guests;
- Holiday or birthday gifts, other than cash, with a low fair market value; and
- Flowers, fruit or similar items provided to employees under special circumstances (for example, on account of illness, a family crisis, or outstanding performance).
Some important clarifications, additions and changes in the 2017 version, that are not excludable as nontaxable de minimis fringe benefits, are:
- Season tickets to sporting or theatrical events;
- The commuting use of an employer-provided car or other vehicle for more than one day a month;
- Membership in a private country club or athletic facility, regardless of the frequency with which the employee uses the facility; and
- The use of employer-owned or leased facilities (such as an apartment, hunting lodge, boat, etc.) for a weekend.
In addition to nontaxable de minimis fringe benefits, there are certain working condition fringe benefits (WCFB), such as employee discounts, which are also nontaxable. An employee discount is excluded from an employee’s gross income if it is a discount allowed for “qualified property or services” provided by an employer to an employee, the employee’s spouse or dependent children, to the extent the discount does not exceed certain limits.
“Qualified property or services” means any property (other than real property, or personal property of a kind held for investment) or services that are offered for sale to nonemployee customers in the ordinary course of the employer’s line of business in which the employee works.
The limits, which cannot be exceeded, are:
- The price at which property or services are offered by an employer for sale to nonemployee customers over,
- The price at which the employer offers the same property or services to employees for use by those employees.
To view a full copy of the 2017 Publication 15-B, visit https://www.irs.gov/publications/p15b/index.html. If you have any questions regarding the changes to the Publication, please contact our office at 703.385.8888 or email@example.com.