Nontaxable Fringe Benefits | How are Taxable Fringe Benefits Taxed?

What are Nontaxable Fringe Benefits?

Non-taxable fringe benefits are money paid to employees in addition to their base pay. This cash benefit can help them pay for work-related expenses like travel and lodging. The employee does not have to pay taxes because the allowance is not regarded as taxable income.

Employee discounts are just one example of non-taxable fringe benefits that are excluded from gross income. Others are Occupational stock options and group-term life insurance.

Where do Taxable Fringe Benefits go on a W-2?

Taxable fringe benefits are detailed on a worker’s W-2 form. The total in box 1 of the form includes these under wages, tips, and other remuneration. Employers are free to put the total on a separate sheet or in box 14 (labeled “Other”); however, this is not necessary.

How are Taxable Fringe Benefits Taxed?

If an employer provides cash-based fringe benefits to its employees, the perks are typically regarded as taxable income. Therefore, bonuses or reimbursements for costs incurred while working are considered taxable income. Every year, these benefits are required to appear on the employee’s W-2, and the bonus’s FMV is withheld.

Fringe benefits may be taxed at the employee’s marginal income tax rate or, if the employer so chooses, subject to supplemental wage deductions at a flat rate of 22%. The supplemental wage rate is 37% if the value of benefits reaches $1 million in a calendar year.

Also, See: Taxable Fringe Benefits