Page 146 - Essentials of Payroll: Management and Accounting

Compensation
athletic, and country clubs. The portion of the club dues that are per-
sonal income to the employee can be treated as a wage expense to the
employer for tax purposes.
Example. Brad Harvest is a member of an airline club, which allows

him access to club facilities at a variety of airports around the country.
He estimates that he uses these facilities 70 percent of the time while
he is traveling on company business. He can substantiate this estimate
with travel records. The annual cost of the membership is $400.
Accordingly, only 30 percent of the cost, or $120, is recognizable as his
personal income.

Education Reimbursement

The reimbursement of an employee’s educational expenses by the
employer is not income to the employee if the education being reim-
bursed is related to his or her current job and will either serve to main-
tain or improve the person’s skills for conducting that job. However, the
payments are income if the education is undertaken to promote the
person or shift him or her into an unrelated position requiring differ-
ent skills.

An employer can change the reportable income situation somewhat
by creating an educational assistance plan (EAP). This is a written plan
that an employer creates on behalf of its employees, who are the only
recipients of educational assistance under the plan. The plan is only
acceptable to the IRS if it does not favor highly compensated employees
or shareholders, does not give employees the option to receive cash
instead of educational assistance,and is launched with a reasonable amount

of notice to employees. For this plan, employees are considered to be
current staff; long-term leased staff; former staff who retired, were laid
off, or who left due to disability; or a sole proprietor or business partner.
Expenses covered under the plan include school fees, supplies, books,

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