Question

List and describe 9 employee fringe benefits that are excluded from income. Give an example of the each benefit and any rules and limitations on the income tax exclusion.

Answer 1

List and describe 9 employee fringe benefits:

Fringe benefits are a form of pay, often from employers to employees, and considered compensation for services beyond the employee's normal rate of pay. They can be made in the form of property, services, cash, or cash equivalents. Cash equivalents are things that can be turned into cash fairly quickly, such as savings bonds. Generally, fringe benefits are taxable to the employee, must be included as supplemental income on the employee's W-2, and are subject to withholding and employment taxes.

Examples of fringe benefits excluded from gross income

• Employer-provided spending accounts such as medical flexible spending accounts and dependent care accounts
• Payments made on employees' behalf for public transportation to and from work and parking while at work
• Up to $5,000 paid by the employer for child- or dependent-care services
• Group term life insurance provided to employees, up to $50,000
• No-additional-cost services such as complimentary flights for airline employees
• Employee discounts
• Working condition fringe benefits such as the use of company vehicles
• Tuition reduction
• De minimis fringe benefits such as employee use of office equipment, holiday gifts, parties or picnics, and entertainment events. In this category the value of the property should be considered minimal