OSPS YearEnd Training Taxable Fringe Benefits and Tax Forms

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OSPS Year-End TrainingTaxable Fringe
Benefitsand Tax Forms
Presented by Sharon McKeehan Date
October 20, 2009
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What Is A Taxable Fringe Benefit?

• The IRS says a fringe benefit is a form of pay
  for the performance of services (employer gives
  to employee), which includes property, services,
  cash or cash equivalents.
• A Taxable Fringe Benefit is included in gross
  income and reported on form W-2 unless
  specifically excluded under an IRS code section.

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WHY DO WE CARE?

• The employer is responsible for proper
  classification and reporting
• Classification taxable or non-taxable
• Reporting included on the W-2
• Gets to the W-2 by way of accurate payroll entries

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WHY DO WE CARE?

• Getting it right the first time
• Employees W-2 is correct
• No audit findings
• Employee able to file taxes
• Accurately
• Without Delay
• No Amended Return

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WHY DO WE CARE?

• Not just a year-end issue, but important to
  ensure accuracy at year-end.
• Should monitor all year for correct capture,
  classification and processing of taxable and
  non-taxable fringe benefits.
• Do your final check at year-end
• This responsibility falls to payroll to ensure
  accuracy.
• Make it known that you need accurate and timely
  information
• Your supervisor is responsible to make sure other
  divisions are cooperative

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Common Transactions

• Meals
• Moving Expenses
• Use of State Vehicle
• Educational Expense
• Domestic Partner Insurance

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Meals

• Overnight travel not taxable
• Conference or Official Business Meeting not
  taxable
• For the Convenience of the Employer not
  taxable but has specific rules to qualify.

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Meals

• Otherwise Taxable and Reportable
• May be defined in CBA
• Lunch when you work offsite or go to training
• Breakfast when you are called out to work early
• Dinner if you work late

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Meals

• Two Ways To Process
• Reimburse through OSPA using code MST pays cash
  and adds to taxable earnings. Adds amount to
  gross pay and reports out on Box 1 of the W-2.
• Record through OSPA using code MS non-cash
  transaction that adds to taxable earnings. Use
  when the meal was paid through accounts payable.

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Moving Expenses

• The non-taxable portion is the cost to move the
  goods and the people. Includes mileage and
  lodging but NOT meals.
• Report through OSPA using code MVN (cash
  payment) Amount is reported in Box 12 on the W-2
  and referenced with a code P.

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Moving Expenses

• Everything else is taxable.
• Report through OSPA using code MVT (cash
  payment). Adds amount to gross pay and reports
  out on Box 1 of the W-2.
• If payments made via accounts payable or to a
  third party, you must still record in OSPA and
  set up opposing PANN entries.

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Use of State Vehicle

• There is very little permission in statute for
  use of a state vehicle
• Generally relates to a state vehicle being
  garaged at home.
• The taxable portion may be
• Commute to work value of 1.50 per way
  non-cash code SVN
• Cents per mile commute to work non-cash code
  SMN
• Either of these will be added to gross pay and
  reported on Box 1 of the W-2.

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Educational Expense

• Educational payments can either paid or recorded
  through OSPA.
• OAM 50.10.00.PO PR updated July 2009 to provide
  more flexibility for making payments, and
  provides more clarity about the difference
  between educational expense reimbursements and
  an educational assistance program.

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Educational Expense

• Educational expenses must be classified as
  taxable or non-taxable according to rules in IRC
  127 and IRC 132
• Code EDN is used for non-taxable payments
• Code EDT is used for taxable payments
• Taxable payments are included in gross pay and
  will report on Box 1 of the W-2.

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Domestic Partner Insurance

• Reporting the fair market value of the partner
  insurance using code DPT will result in the
  amount being added to gross pay as a non-cash
  transaction and reported in Box 1 of the W-2.

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Domestic Partner Insurance

• Beginning in tax year 2009, employees may declare
  their partner to be a dependent for tax purposes.
  That will eliminate the use of the DPT
  transaction and the value of the insurance will
  not be considered a taxable fringe benefit.
• See updated OSPA data entry guide for PEBB
  Domestic Partner.

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ACCOUNTABLE PLAN

• There is a business connection to the expenditure
  or the reimbursement is for expenses that would
  be an allowable deduction for the employee on the
  employees tax returns.

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ACCOUNTABLE PLAN

• The employee is required to provide adequate
  accounting for the expenditure (s) within a
  reasonable amount of time. The employee must
  submit receipts unless under a per diem plan.

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ACCOUNTABLE PLAN

• The employee is required to return excess
  reimbursements or advances within a reasonable
  time.
• If the policy meets all three criteria, the
  reimbursements are non-taxable to the employee.

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COMMON TRANSACTIONS

• Uniforms
• Special Boots or Shoes
• Safety Equipment
• Tool Allowance

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• Questions?
• Contact
• Sharon McKeehan
• Sharon.e.mckeehan_at_state.or.us
• 503-378-6777 x230