Fringe benefits partners and more-than-2% S shareholder employees can and can’t claim
Partnerships-and limited liability companies (LLCs) treated as partnerships-and S corporations have distinct tax and non-tax advantages. Some of these are the tax treatment of Fringe Benefits.
- Working condition fringe benefits.
. . . Business-related use of a company auto, if properly substantiated. The personal-use value of the auto must, however, be treated as compensation income.
. . . The business-use portion of company paid country club dues, even though the dues are completely nondeductible.
. . . Job-related education expenses paid by the firm.
. . . The use of a cell phone provided to an employee primarily for noncompensatory business reasons.
- De minimis fringe benefits include:
. . . Traditional birthday or holiday gifts of property (not cash) with a low fair market value (an undefined term in the regs), occasional theater or sporting event tickets, and fruit, books, or similar property provided under special circumstances (e.g., on account of illness, outstanding performance, or family crisis);
. . . Traditional awards (such as a gold watch) upon retirement after lengthy service and
. . . Personal use of a cell phone provided primarily for noncompensatory business reasons.
- Dependent care assistance. The exclusion is for amounts provided under a written plan of the employer and is limited annually to $5,000 ($2,500 for a married person filing separately). However, for a plan to qualify as a dependent care assistance program, no more than 25% of the amounts paid or incurred by the employer for dependent care assistance during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5% of the stock or of the capital or profit interest in the employer.
- Athletic facilities. The Code Sec. 132(j)(4) exclusion for on-premises athletic facilities (e.g., swimming pool, gym) is available to partners (and their spouses and/or children).
No-additional-cost services and qualified employee discounts.
- Transportation fringes. A partner and more-than-2% S corporation shareholder cannot exclude qualified transportation fringes under Code Sec. 132(f) . For 2017, this includes the value of qualified parking up to $255 a month; and up to $255 a month of the combined value of transit passes and transportation in a commuter highway vehicle; or up to $20 a month of qualified bicycle commuting reimbursement. However, under the de minimis benefit rules, tokens or fare cards provided by a partnership to a partner that enable the recipient to commute on a public transit system (not including privately-operated van pools) are excludable from income if the value of the tokens or fare cards in any month doesn’t exceed $21. If the full value of a pass provided in a month exceeds $21, the full value of the benefit is includible.
(Source: RIA Checkpoint Federal Taxes Weekly Alert, 05/25/2017)
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