Question

1. Discuss one fringe benefit. Is it taxable? If so, how is it taxed? What type of employee would get these benefits (i.e. CEO, CPA, Administrative Assistant)?

Answer 1

Fringe benefits are those benefits given by the employers to their employees over and above their agreed salary or wages. These are the non-cash benefits and include health insurance, educational assistance, physical fitness, relocation allowance, employee stock options, working condition benefits etc. Employers provide fringe benefits to attract the talented employees. In the world of competition, employers find it challenging to get required talent based on salary alone. The fringe benefits are taxable depending on the type of benefit offered. Many benefits are not required to be added into the employee's taxable income, but there are some exceptions.

Working condition benefit is an example of fringe benefit, which is taxable on the basis of some conditions. Any machine or supplies purchased by the employer for the employee and it is exclusively used for business purpose, and then it is tax free. But the employee is using it for his personal purpose, then he has to pay tax.

For example, Mich the owner of private software company, purchased a laptop and issued to the technical person Job, so he can work from home, and available when ever required. If job uses the laptop 100% for office prupose, he is not liable to pay tax for using it. But if he is using 50% of the laptop for his personal prupose, he has to pay tax, equal to the 50% of the value of the laptop.