Employers who offer fringe benefits like transportation reimbursement and meals to their employees are familiar with Internal Revenue Service (IRS) Publication 15-B – Employer’s Guide to Fringe Benefits, which offers guidance on the tax treatment of such employee benefits.
The IRS recently released an updated version of Publication 15-B for 2018, incorporating tax law changes as a result of the Tax Cuts and Jobs Act. The following types of benefits are affected by the new law: qualified transportation plans, moving expense reimbursements, employer-provided meals and employee achievement awards.
Employers should review the new Publication 15-B carefully and seek out qualified tax advice, but here are highlights of the changes:
- Qualified transportation benefits: Effective in tax year 2018, no employer deduction is allowed for qualified transportation benefits. Employers therefore cannot deduct the wages that employees elect to contribute on a pre-tax basis for qualified transportation benefits. Publication 15-B does not address the unrelated business income tax (UBIT) issue for tax-exempt employers providing such benefits.
- Moving expense reimbursements: The tax exclusion for qualified moving expense reimbursements is suspended for tax years beginning after Dec. 1, 2017, and before Jan. 1, 2026. During this period, the exclusion is only available for members of the U.S. armed forces on active duty who move because of a permanent change of station.
- Employee meals: Effective for 2018, the 50 percent limit on deductions for food or beverage expenses also applies to food or beverage expenses that are excludable from employees’ income as a de minimis fringe benefit. However, food or beverage expenses related to employee recreation, such as holiday parties or annual picnics, are not subject to the 50 percent limit on deductions when incurred for the primary benefit of employees.
- Employee achievement awards: Employers may exclude the value of tangible personal property that is given to an employee as an award for either length of service or safety achievement. The new tax law clarifies that the tax exclusion does not apply to awards of cash, cash equivalents, gift cards, gift coupons or gift certificates (other than arrangements in which the employee selects from a limited array of items preselected and preapproved by the employer). The tax exclusion also does not apply to vacations, meals, lodging, tickets to theater or sporting events, stock, bonds, other securities and similar items.
Questions about tax law revisions or other benefits-related issues? Contact Consolidated Insurance.