What is a Taxable Fringe Benefit? A Legal Overview
Definition & Meaning
A taxable fringe benefit is a noncash benefit provided by an employer that is considered part of an employee's compensation. These benefits are subject to federal income tax withholding, which is deducted from the employee's regular pay during the period the benefits are provided. Generally, unless a specific law excludes a benefit, it is subject to taxation.
For instance, work clothing may not be taxable if it is required for the job and not suitable for everyday wear. However, if the clothing can be worn outside of work, such as a suit jacket for a police detective, it is considered taxable.
Legal Use & context
Taxable fringe benefits are relevant in employment law and taxation. Employers need to understand these benefits to comply with tax regulations and ensure proper withholding. This term may also involve various legal forms, such as those related to payroll and tax reporting, which users can manage using templates from US Legal Forms.
Real-world examples
Here are a couple of examples of abatement:
Example 1: An employer provides safety gear to construction workers. Since this gear is necessary for the job and not suitable for everyday use, it is not taxable.
Example 2: A company gives its employees branded jackets that can be worn casually outside of work. These jackets are considered taxable fringe benefits because they are suitable for everyday wear.