Page 145 - Essentials of Payroll: Management and Accounting

ESSENTIALS of Payr oll: Management and Accounting
deductions on the employer’s tax return,though all of the expenses claimed
by employees can be reimbursed to them without it being listed as income
to them. Also, meal expenses incurred by the company on behalf of an
employee are not wages to the employee if they are incurred for the

employer’s convenience and are provided on the employer’s premises.
Health insurance costs, including expenses incurred for an employee’s
family,are not considered employee wages,but must be recorded as wages
in Subchapter S corporations for those employees who own more than
2 percent of the business.
If an employee lives away from home for less than one year on
company business, the living costs paid to the employee for this period

are not considered taxable income.However,once the duration exceeds
one year,the employee is considered to have permanently moved to the
new location, rendering all such subsequent payments taxable income
to the employee.
Such fringe benefits as tickets to entertainment events, free travel,
and company cars should be recorded as employee gross income. The
amount of incremental gross income added should be the fair market
value of the fringe benefit, minus its cost to the employee, minus any
deductions allowed by law.

Example. Brad Harvest obtains discounted season tickets to the local
baseball team through his company. The market price for the tickets is
$2,500, but he only pays his employer $750 for them.The difference of
$1,750 is considered income to Mr. Harvest, and should be reported as
such to the IRS.

Club Memberships

Club dues are taxable income to the employee, except for that portion
of the dues that are business related, which must be substantiated. Clubs
that fall into this category are airline and hotel clubs, as well as golf,

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