Question

Trinidad Schwab is an employee at the Kyletown Fire Department. He received the following benefits from his employer during 2017:
On-site housing, $400 per month
Employer-provided cell phone, $100 per month
Meals, $200 per month
Required: What amount of these benefits are taxable for 2017?____

✓ The employer gets to deduct the cost of the meals as a business expense and the employeesget a tax-free fringe benefit: free food.

By looking at the above provisions, only meals are tax free but housing and cell phone are fully taxable

I came up with taxable amount = (400+100)*12=$6000 and got it incorrect.

Let me know what I'm doing wrong, please and thank you.

Answer 1

Taxable amount of benefits which are received by the employee, Trinidad Schwab for 2017

i.On-site housing, $400 per month - The amount of On-site housing benefit provided by the Employer is “non-taxable income” for ‘Trinidad Schwab’. Since this is a “Non-Taxable Fringe benefit”. On-site housing means the lodging facility at the business premises, which is provided by the employer

Explanation: As per Internal Revenue Service (IRS), the value of lodging provided to you and your family by your employer at no charge if the following conditions are met;

a.Furnished on the business premises of your employer,

b.Furnished for the convenience of your employer, and

c. A condition of your employment. (You must accept it in order to be able to properly perform your duties.)

ii. Employer-provided cell phone, $100 per month – The amount of Employer provided cell phone “non-taxable income” for ‘Trinidad Schwab’. Since this is a “Non-Taxable Fringe benefit”.

Explanation: Internal Revenue Service (IRS) Issue Guidance on Tax treatment of Employer-provided cell phone, provides that when an employer provides an employee with a cell phone primarily for no compensatory business reasons, the business and personal use of the cell phone is generally non-taxable to the employee.

iii. Meals, $200 per month – The amount of Meals benefit provided by the Employer is “non-taxable income” for ‘Trinidad Schwab’. Since this is a “Non-Taxable Fringe benefit”.

Explanation: As per Internal Revenue Service (IRS), the value of meals provided to you and your family by your employer at no charge if the following conditions are met.

a. Furnished on the business premises of your employer, and

b. Furnished for the convenience of your employer.

Also, the value of meals or meal money are not including in your income, since that qualifies as a “minimal fringe benefit”. “Minimal Fringe Benefit” means if employer provides employee with a product or service and the cost of it is so small for the employer.

Conclusion

All of the 3 Fringe Benefits; On-site housing, $400 per month, Employer-provided cell phone, $100 per month and Meals, $200 per month are “Non-Taxable Benefits” for Trinidad Schwab for 2017