The Catholic University of America

Summary of Federal Laws

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Related Policy

Tax Compliance Policy


Tax Issues Related to Employment

Fringe Benefits

26 U.S.C. 132; 26 USC 280F; 26 CFR 1.274-5T; 26 CFR 1.132

Any property or service (or cash under certain circumstances) provided to an employee in addition to or in lieu of regular wages will be a taxable fringe benefit to the employee, unless specifically excluded by statute. Employers must report taxable fringe benefits to employees on Form W-2, and taxable fringe benefits to independent contractors on Form 1099-MISC. Fringe benefits include accident and health benefits; achievement awards; adoption assistance; athletic facilities; de minimis benefits; dependent care assistance; educational assistance; employee discounts; employee stock options; group-term life insurance coverage; lodging on your business premises; meals; moving expense reimbursements; no-additional -cost services; transportation (commuting) benefits; employer provided cell phones, tuition reduction and working condition benefits.

For a summary of rules that apply to each of the different categories, and a chart containing on overview of tax treatment of these benefits, see IRS Publication 15-B Employer's Tax Guide to Fringe Benefits. 

Qualified Transportation fringe benefits do not require a written plan document. See 26 CFR 1.132.9 at Q&A 6


The Tax Cuts and Jobs Act changes effective tax year 2018

Under HR 1 (Public Law 115-970 The Tax Cuts and Jobs Act, signed into law on Dec. 22, 2017, qualified moving expenses may be excluded from employee's income through 2017, but this fringe benefit will be suspended, except for military moving expenses, for tax years 2018-2025. 

(note: IRS confirmed 2018 reimbursements for 2017 moving expense can be tax free)

Qualifed bicyle commuting costs as a qualified transportation fringe benefit will aslo be suspended for tax years 2018 through 2025.

See the IRS Tax Cut and Jobs Act Resources and also SHRM summary entitled President Signs Tax Bill Altering Employee Benefits. (1-5-18)

IRS Notice 2012-38

This Notice requests public comments on issues associated with Revenue Ruling 2006-57, 2006-2 C.B. 911, which became effective on January 1, 2012. Rev. Rul.2006-57 provides guidance on the use of smartcards, debit or credit cards, or other electronic media to provide qualified transportation fringes under sections 132(a)(5) and (f) of the Internal Revenue Code (the Code). The Treasury Department and the IRS have become aware of changes in technology that may give rise to the need for additional guidance on the use of electronic media to provide transit benefits.

IRS Notice 2011-72 Tax Treatment of Employer-Provided Cell Phones

This notice provides guidance on the tax treatment of cellular telephones or other similar telecommunications equipment (hereinafter collectively “cell phones”) that employers provide to their employees primarily for noncompensatory business purposes. See also Interim Guidance on Reimbursement, IRS Field Memorandum, dated Sept. 14, 2011. If the employer reimburses the employee for the cell phone allowance in accord with the IRS Notice the income will not be considered additional wages or income to the employees.See the NACUBO web page on this as well for clarification on allowances delivered via payroll.

The substantiation in Treasury Regulation 1.62-2(d)(1) must show the reasonableness of the amount of the allowance provided.  One cannot provide, say, $1,000/month tax free and call it a cell phone allowance.  The University should have a memo somewhere that states why the particular allowance level selected is the appropriate level to set.  If the University were to review all the major carriers and conclude that the average cost of a cell phone/smartphone with reasonable minutes and data access is $100/month, then that could be the reasonable level and the memo would be the appropriate substantiation. (nb: This last paragraph provided courtesy of Thomas Arden Roha, Esq)

Removal of Cell Phones from Definition of Listed Property

Section 2043 of the Small Business Jobs Act of 2010 (HR 5297) removed cell phones from the definition of listed property for which an employer must substantiate that all or a portion of the use of the listed property is by employees in the employer’s trade or business. President Obama signed the legislation on 9-27-10 and the provision on cell phones is effective for tax years ending after Dec. 31. 2009.


Related Code Provisions

26 USC § 162 is the provision of the U.S. Code that allows for the deduction of trade or business expenses. 26 USC § 117 deals with exclusion from income of scholarships and fellowships, and 26 USC § 127 deals with educational assistance programs and their taxability.


IRS Publication 15-B Employer's Tax Guide to Fringe Benefits 





updated 2-12-18