What are fringe benefits?
Fringe benefits are benefits or compensation on top of an employee’s regular salary or wages for work they do. Sometimes known as “perks,” fringe benefits can include a variety of things from employee stock options to company cars. Many fringe benefits are taxable (note, we didn’t say all) and, as such, must be reported on Forms W-2 and 940.
Check out the IRS' Employer's Tax Guide to Fringe Benefits, for more information.
How are fringe benefits reflected on tax forms?
Keep in mind that fringe benefits recorded in Justworks only reflect the value of the benefit you’ve offered your employees and adds that value to their taxable income. This value added onto employees’ income is also added to employer taxes.
For this reason, it’s a good idea to let your employees’ know when you record the value since they will see a lower net pay amount on their future payment.
How can I record fringe benefits in Justworks?
Admins with payments permissions can record fringe benefits that they offer their employees outside of Justworks by navigating to the Payments Center and scrolling down to ‘Record a Payment’. The Fringe Benefit pay type will show there.
From there, you’ll see the list of payees. Click on the + next to a member’s name in order to designate that you’ll pay them. Once you’ve selected each payee, hit ‘Continue’.
On the next screen, you’ll see each employee you’ve selected. For each member, you’ll need to select the following:
- An upcoming regular salary/wage payment to record the fringe benefit with
- The fringe benefit type from the list of dropdown options
- The taxable value of the fringe benefit
For guidelines on how to calculate the taxable value of fringe benefits you’ve offered employees, you can refer to the IRS Publication 15-B.
|Fringe Benefit Subtype||Description & Guidelines|
|Moving Expenses||The amount that was paid to an employee to help with a move|
|Taxable Gym Membership||
The value of any contributions to a gym or fitness membership made by the employer.
Please note you should NOT report the value of fitness memberships provided through Justworks partnerships (e.g. ClassPass).
|Value of Employer Provided Vehicle||
The value of the personal use of the vehicle.
This should not include the value of the vehicle’s use for business-related purposes.
|Value of Car Lease||The entire value of the lease regardless of whether the use is for personal or professional purposes.|
Taxable income from an employer-provided cell phone
|The value of a cell phone paid for an employee for non-business purposes or personal use.|
|Taxable Transportation Benefits||
Any amounts (employer contributions and employee pre-tax deferrals) that exceed per month is considered taxable.
Please note you should NOT report the value of WageWorks contributions through Justworks.
|Meal & Lodging Allowances||The maximum amount per meals and lodging is based on the city.|
|Housing Allowances||The taxable amount should be the fair market value of the lodging.|
|Taxable income from exercise of nonstatutory stock options||The taxable amount should be the fair market value minus the exercise price.|
|Taxable income from issuance of restricted stock||If the employee elects to be taxed on the value of the stock when it is awarded, the taxable amount should be the fair market value when the stock is awarded.|
|Taxable income from vesting of restricted stock||If the employee elects to defer withholding on the stock until it is vested, the taxable amount should be the fair market value of the stock on the date the stock is transferred to the employee minus any amount paid by the employee for the stock.|
|Taxable employer-provided life insurance||
The total taxable value of group term life insurance for coverage greater than $50,000. If your company files as an S-Corp, the total amount of the employer-paid premium for life insurance is taxable for the greater than 2% shareholders.
Please note you should NOT report the value if you have employer-paid life insurance with Metlife through Justworks.
Admins also have the option to write a note with the fringe benefit, which will be visible to the recipient on their paystub.
You’ll see a green banner once you successfully record the fringe benefit. As an extra check, you can view any recipient’s One-time payments tab, as well as the company’s estimated invoices, to confirm.
When should I record Fringe Benefits in Justworks?
It is best practice and, in many cases, required by IRS guidelines to record fringe benefits as they are provided to employees throughout the year. This also means you don’t have to remember to do it later and employees won’t have a large chunk of taxes withheld on their final payrolls of the year.
As mentioned above, if your company offers fringe benefits such as, taxable gym memberships, employer-paid life insurance, etc. through Justworks, you do not need to record these again -- they’re already accounted for.
When recording fringe benefits in Justworks, be sure to check for the following:
- The taxes that will be deducted for the taxable fringe benefit are less than the amount the employee receives on a typical paycheck.
- If the recipient is an hourly employee, that their timecard for the selected pay date has already been entered and approved.
It’s always a good idea to go back to your dashboard and view the ‘Upcoming Payments’ section to make sure you see the fringe benefit reflected on the estimated invoice.
Additionally, unpaid owners and terminated employees will not show from the list of possible recipients in the workflow, as there will be no next upcoming regular salary/wage payment to attach the fringe benefit to. If you need to record fringe benefits for these member types, please reach out to our Customer Success team.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.