2008 Instructions For Schedule J (Form 990) (Page 5 of 6) in pdf

Organization A. In year 4 the deferred

Column (D). “Nontaxable benefits” are

column (D). “Disregarded benefits”

benefits specifically excluded from

generally include fringe benefits

amounts for years 1 through 3 are paid

taxation under the Internal Revenue

excluded from gross income under

to the executive. For each of the years

Code. Report the value of all

section 132. These benefits include the

1 through 3, Organization A reports

nontaxable benefits provided to or for

following.

$2,000 of deferred compensation for

•

the benefit of the listed person, other

No-additional cost service.

the executive in column (C). For year 4,

•

than benefits disregarded for purposes

Qualified employee discount.

Organization A reports $6,000 in

•

of section 4958 under Regulations

De minimis fringe.

column (B)(iii) and $6,000 in column

•

section 53.4958-4(a)(4). Common

Reimbursements pursuant to an

(F).

nontaxable and section 4958

accountable plan.

•

Example 2. Under the terms of his

disregarded benefits, referred to below

Working condition fringe.

•

employment contract with Organization

as “fringe benefits,” are discussed in

Qualified transportation fringe.

•

B beginning July 1 of calendar year 1,

detail below.

Qualified moving expense

an executive is entitled to receive

reimbursement.

Depending on the type of benefit,

•

$50,000 of additional compensation

Qualified retirement planning

fringe benefits may be provided only to

after he has completed five years of

services.

employees or also to persons other

•

Qualified military base realignment

service with the organization. The

than employees, such as directors,

and closure fringe.

compensation is contingent only on the

trustees, and independent contractors.

longevity of service. The $50,000 is

Fringe benefits may be entirely

De minimis fringe. A “de minimis

treated as accrued or earned ratably

personal in nature or may combine

fringe” is a property or service the value

over the course of the five years of

personal and business elements.

of which, after taking into account the

service, even though it is not funded or

frequency with which similar fringes are

The taxability of a benefit may

vested until the executive has

provided by the employer to the

depend upon the form in which it is

completed the 5 years. Organization B

employees, is so small as to make

provided. For example, a cash housing

makes payment of $50,000 to the

accounting for it unreasonable or

allowance is ordinarily reportable in

executive in calendar year 6.

administratively impractical.

Form W-2, box 5. Under section 119,

Organization B reports $5,000 of

housing provided for the convenience

Working condition fringe. A

deferred compensation in column (C)

of the employer may be excludable,

working condition fringe is any property

for calendar year 1 and $10,000 for

and the fair rental value of in-kind

or service provided to an employee to

each of calendar years 2-5. For

housing provided to certain school

the extent that, if the employee paid for

calendar year 6, Organization B reports

employees may be part taxable and

the property or service, the payment

$50,000 in column (B)(iii) and $45,000

part excludable, depending on facts

would be deductible by the employee

in column (F).

and circumstances. Taxable benefits

under section 162 (ordinary and

must be reported on Form W-2.

necessary business expense) or

Example 3. An executive

section 167 (depreciation). In some

The following benefits provided for a

participates in Organization C’s

cases, property provided to employees

listed person must be reported in

incentive compensation plan. The plan

may be used partly for business and

column (D) to the extent not reported

covers calendar years 1 through 5.

partly for personal purposes, such as

as taxable compensation in Form W-2,

Under the terms of the plan, the

automobiles. In that case the value of

box 5 (or in box 1, if no compensation

executive is entitled to earn 1% of

the personal use of such property is

is reported for that person in box 5) or

Organization C’s total productivity

taxable compensation, and the value of

Form 1099-MISC, box 7.

savings for each year during which

•

the use for business purposes properly

Value of housing provided by the

Organization C’s total productivity

accounted for is a working condition

employer.

savings exceed $100,000. Earnings

•

fringe benefit.

Educational assistance.

under the incentive compensation plan

•

Health insurance.

will be payable in year 6, to the extent

Accountable plan amounts. An

•

Medical reimbursement programs.

funds are available in a certain

accountable plan is a reimbursement or

•

Life insurance.

“incentive compensation pool.” For

other expense allowance arrangement

•

Disability benefits.

years 1 and 2, Organization C’s total

that meets the following rules.

•

Long-term care insurance.

productivity savings are $95,000. For

1. The expenses covered under the

•

Dependent care assistance.

each of years 3, 4, and 5, Organization

plan must be reasonable employee

•

Adoption assistance.

C’s total productivity savings are

•

business expenses that are deductible

Payment or reimbursement by the

$120,000. Accordingly, the executive

under section 162 or other provisions of

organization of (or payment of liability

earns $1,200 of incentive compensation

the Code.

insurance premiums for) any penalty,

in each of years 3, 4, and 5. She does

2. The employee must adequately

tax, or expense of correction owed

not earn anything under the incentive

account to the employer for the

under chapter 42 of the Internal

compensation plan in years 1 and 2

expenses within a reasonable period of

Revenue Code, any expense not

because the relevant performance

time.

reasonably incurred by the person in

criteria were not met in those years.

3. The employee must return any

connection with a civil judicial or civil

Although the amounts earned under the

excess allowance or reimbursement

administrative proceeding arising out of

plan for years 3, 4, and 5, are

within a reasonable period of time. See

the person’s performance of services

dependent upon there being a sufficient

Regulations section 1.62-2 and Pub.

on behalf of the organization, or any

incentive compensation pool from

535, Business Expenses, for

expense resulting from an act or failure

which to make the payment,

explanations of accountable plans.

to act with respect to which the person

Organization C reports $1,200 of

has acted willfully and without

deferred compensation in column (C) in

The method by which benefits under

reasonable cause.

years 3, 4, and 5. In year 6,

an accountable plan are provided

The list above is not all-inclusive.

Organization C pays $3,600 attributable

(whether reimbursement, cash

to years 3, 4, and 5, and reports $3,600

Disregarded benefits. Disregarded

advances with follow-up accounting, or

in column (B)(ii) and $3,600 in column

benefits under Regulations section

charge by the employee on company

(F).

53.4958-4(a)(4) need not be reported in

credit card) is not material. Payments

-5-

2008 Instructions For Schedule J (Form 990) Page 5

Related Articles

Related forms

Related Categories