Regardless of whether you use a payroll service provider or prepare payroll in-house, businesses will need to verify that all special payments to employees are correctly reported with their earnings. Below are some items that will need to be included in wages:

  1. Shareholder employees (S Corporations only) need to add the costs of their health insurance and life insurance paid by the corporation to their wages.
  2. Employee’s personal use of employer-provided vehicles should be added to their wages. Companies that elect to include 100% of the vehicle use in wages must use the IRS annual lease value method.
  3. Qualified nontaxable moving or relocation expenses paid directly to your employees should be reported on the W-2 in Box 12. (Payments made to third parties for the employees should not be included on the W-2) Non-qualified moving expenses must be added wages.
  4. You must include the costs of group-term life insurance coverage over $50,000 in wages. However, this amount is only subject to FICA taxes and must be reported in Box 12 of the W-2.
  5. Cash and non-cash gifts (ex. Season tickets to sporting events, gift certificates and gift cards) should be added to an employee’s wages. (De Minimis gifts such as a holiday turkey or ham, personal use of employer-provided cell phone, occasional company parties or picnics, or occasional tickets for theater or sporting events are excluded from an employee’s wages).
  6. Nonaccountable-plan expense reimbursements should be included in an employee’s wages.

Generally taxable fringe benefits are subject to Federal income tax withholding, FICA, FUTA, and state taxes. However, some benefits are not subject to all of the above taxes. Contact HAS for assistance in determining if your special payments to your employees are subject to special reporting requirements.