Publication 80 - Circular Ss - Department Of The Treasury (Page 6 of 24) in pdf

Valuation of vehicles provided to employees. If you

Fringe Benefits

provide a vehicle to your employees, you may either deter-

mine the actual value of the benefit for the entire calendar

Unless the law provides otherwise, fringe benefits are

year, taking into account the business use of the vehicle, or

includible in the gross income of the employee and are

consider the entire use for the calendar year as personal

subject to employment taxes. Examples of fringe benefits

and include 100% of the value of the vehicle in the

include automobiles or aircraft flights that you provide, free

employee’s income. For reporting information to employ-

or discounted commercial airline flights, vacations, dis-

ees, see the box 14 instructions on Form W-3SS.

counts on property or services, memberships in country

clubs or other social clubs, and tickets to entertainment or

Special accounting rule for fringe benefits provided

sporting events. In general, the amount included in the

during November and December. You may choose to

employee’s income is the excess of the fair market value of

treat the value of taxable noncash fringe benefits provided

the benefit over the sum of any amount paid for it by the

during November and December as paid in the next year.

employee plus any amount excludable by law. For details

However, this applies only to those benefits that you actu-

on fringe benefits, see Pub. 15-B, Employer’s Tax Guide

ally provided during November and December, not to

to Fringe Benefits.

those you merely treated as paid during those months.

When fringe benefits are treated as paid. You can elect

If you use this rule, you must notify each affected em-

to treat taxable noncash fringe benefits (including personal

ployee between the time of the employee’s last paycheck

use of an automobile provided by you) as paid by the pay

of the calendar year and at or near the time that you give

period, quarter, or on any other basis that you choose, but

the employee Form W-2VI, W-2GU, W-2AS, or W-2CM. If

they must be treated as paid at least annually. You do not

you use the special accounting rule, your employee must

have to make a formal election of payment dates or notify

also use it for the same period that you use it. You cannot

the IRS. You do not have to make this election for all

use this rule for a fringe benefit of real property or tangible

employees, and the election can be changed as often as

or intangible real property of a kind normally held for

desired, as long as all benefits provided in a calendar year

investment that is transferred to your employee.

are treated as paid no later than December 31 of the

calendar year. However, see Special accounting rule for

fringe benefits provided during November and Decem-

5. Taxable Tips

ber below.

You can treat the value of a single taxable noncash

Tips that your employee receives are generally subject to

fringe benefit as paid on one or more dates in the same

withholding. Your employee must report cash tips to you by

calendar year, even if the employee gets the entire benefit

the 10th of the month after the month that the tips are

at one time. However, once you elect the payment dates,

received. The report should include tips that you paid to the

you must report the taxes on your return in the same tax

employee from charge receipts. Also include tips that the

period in which you treated them as paid. This election

employee received directly from customers and other em-

does not apply to a fringe benefit where real property or

ployees, and indirectly (e.g., tip splitting). The report

investment personal property is transferred.

should not include tips that the employee paid out to other

employees. No report is required for months when tips are

Withholding social security and Medicare taxes on

less than $20. Your employees report tips on Form 4070,

fringe benefits. You add the value of fringe benefits to

Employee’s Report of Tips to Employer, or on a similar

regular wages for a payroll period and figure social security

statement. They may also use Form 4070A, Employee’s

and Medicare taxes on the total.

Daily Record of Tips, to keep a record of their tips. Both

If you withhold less than the required amount of social

forms are printed in Pub. 1244, Employee’s Daily Record

security and Medicare taxes from the employee in a calen-

of Tips and Report to Employer, available from the IRS.

dar year but report the proper amount, you may recover

the taxes from the employee.

The statement must be signed by the employee and

must show the following:

Depositing taxes on fringe benefits. Once payment

•

The employee’s name, address, and SSN.

dates for taxable noncash fringe benefits are elected,

•

taxes are deposited under the general deposit rules (dis-

The employer’s name and address.

cussed in section 8), including those for timeliness of

•

The month or period that the report covers.

deposit. You may make a reasonable estimate of the value

•

of the fringe benefits deemed to be paid on the date(s)

The total tips.

elected, for purposes of meeting the timely deposit require-

ments. In general, the value of taxable noncash fringe

You must collect the employee social security and Medi-

benefits provided in a calendar year must be determined

care taxes on the employee’s tips. You can also collect

by January 31 of the following year.

these taxes from the employee’s wages or from other

You may claim a refund of overpayments or elect to

funds that he or she makes available. Stop collecting the

have any overpayment applied to the next employment tax

employee social security tax when his or her total wages

return. If deposits are underpaid, see Deposit Penalties in

and tips for 2004 reach $87,900. Collect the employee

section 8.

Medicare tax for the whole year on all wages and tips.

Page 6

Publication 80 - Circular Ss - Department Of The Treasury Page 6

Related Articles

Related forms

Related Categories