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What are fringe benefits?
Fringe benefits are additional benefits or compensation on top of an employee’s regular salary or wages for work they do. Some examples of common fringe benefits are employer-paid group term life insurance, taxable gym memberships, and taxable transportation benefits. Fringe benefits are generally considered taxable, unless a specific exemption applies. Taxable fringe benefits must be reported on Forms W-2 and 940. We strongly recommend that employers consult with their accountant or tax advisor to confirm if the benefits they offer are indeed taxable and what the taxable amount is that should be reported.
Check out the IRS' Employer's Tax Guide to Fringe Benefits, for more information.
How are fringe benefits reflected on tax forms?
Many fringe benefits are considered taxable income, and are therefore subject to Federal Income tax, Social Security tax, and Medicare tax. Fringe benefits may also be subject to taxation under the Federal Unemployment Tax Act (FUTA).
How can I record fringe benefits in Justworks?
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. You need to record taxable fringe benefits that you provided to your employees outside of Justworks by going to the Payments Center and scrolling down to 'Record a Payment'. You'll see the option to record fringe benefits there.
Select the employee you need to record a fringe benefit payment for.
You’ll be able to tell that they’ve been added successfully when the + next to their name becomes a check mark, like so:
Once you hit ‘Continue,’ you’ll be able to see all of the employees you selected on the previous screen.
First, you’ll have to select a payday for the fringe benefit. When you record a fringe benefit for your employee, Justworks does not pay the employee. We will withhold the corresponding taxes for that benefit on your employee’s next paycheck and remit the taxes associated with the benefit. You will also be charged employer taxes on the additional income reported for the employee.
Finally, you’ll have to select the subtype for the fringe benefit. Below are some guidelines for choosing the right subtype and calculating the appropriate taxable amount. However, it's best practice to consult with your accountant or tax advisor to confirm whether any employer-provided benefits you provide are taxable and the appropriate value to report. Please keep in mind that Justworks does not provide tax or legal advice.
For resources about calculating the taxable amount of the fringe benefit, please refer to your accountant and IRS Publication 15b for accurate calculation.
If you cannot find the subtype you're looking for, need to report it for a terminated employee, or record an amount that is much higher than the employee’s average paycheck amount, please reach out to your Account Manager or our Customer Success team for help recording this benefit.
If you’d like, you can also add a note to your entry to specify any additional details regarding this fringe benefit. The notes section will be visible to the employee when they receive the payment.
When you’re ready to record the amount, hit ‘Submit.’
Disclaimer
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.