“The real difference between death and taxes is that death doesn’t get worse every time Congress meets.”
– Will Rogers
ACTUAL “CASE HISTORY”: Just yesterday, Jay, a long-time client, called. He asked me a question I am asked a lot: “Hey, Al . . . I have asked my boss for a raise, but he said that he can’t right now. He said, though, that if I was interested, he would consider “tax-free perk’s,” instead. Any idea of what he is talking about? Is that legal?”
Jay seems to be facing what a lot of people are facing these days: it’s getting harder to “make ends meet” and employers are very reluctant to significant raises, if any at all. Instead, many employers are offering tax-free fringe benefits (“perquisites,” or more commonly, “perks,” for short.), instead, either by offering them to certain individuals who are deemed particularly deserving of them, or to all employees in a structured fringe benefit plan.
Showing employees they are appreciated, and keeping costs under control, are both big parts of successfully running a business.
LESSON TO LEARN: Pretty much everyone knows that employers can pay for employees’ health insurance and life insurance as a tax-free benefits, but beyond those two, and a few others, most people don’t know of the many tax-free perks employers can provide employees under US. law.
Since such tax-free fringe benefits are treated by the IRS as both (a) entirely valid business expenses to employers, yet (b) also tax-free “rewards” to employees, it makes offering them doubly attractive from both employer and employee perspectives.
While I am not a tax lawyer, and cannot provide tax-related advice, I do suggest you (a) consider the value that such tax-free fringe benefits may be to you, and (b) confirm with your tax advisor or personal accountant that, indeed, they would be tax-free to you, as whether you qualify of some of these non-taxed perks does require attention to detail. (Indeed, the amount of tax-free benefit under several of these benefits changes from year to year.) Then, if it makes sense in your situation, consider raising the request for one or more of these to your employer.
If you can get better “rewarded” by your employer, and have no greater a tax bill, what could be so bad?
WHAT YOU CAN DO: Here are ten tax-free employment “fringe benefits” that might make sense for you, and to your employer:
1. Commuter Benefits and Free Parking: Employers can contribute up to $125 per month, tax free, for public transportation for each employee, up to $240 per month for qualified parking, or up to $365 per month for both public transportation and qualified parking, combined. At $365 a month, that comes to a potential tax-free benefit of $4,380 a year. That’s no small change!
2. Dependent Care Assistance: If an employer establishes a dependent care assistance program for its employees to assist, for example with daily childcare costs, those employees can exclude from their income up to $5,000 per year for benefits received for this purpose. That could help pay for an awful lot of diapers!
3. Meals and Lodging On-Premises: If meals are provided to an employee by an employer for “the employer’s convenience” (that is, so you can be quickly back at your desk in case of crisis) and the meals are provided on premises, the value of the meals are not taxable to the employee. The same goes for lodging, provided it is a condition of employment (that is, if overnight stay is necessary to perform the job duties). Frequent cost-free and tax-free meals can amount to a savings of thousands of dollars a year, tax-free. So, there is a tax-free lunch, after all!
4. Educational Assistance: An employer may pay for tuition and education assistance for an employee under an employer’s educational assistance plan. The costs are excludable from the employee’s reportable wages to a maximum $5,250 per calendar year. The education does not have to be job related, and can be in trade school, undergraduate courses or graduate programs. It is surely in interests of employees, employers and our entire society that our employees are better trained, greater skilled and possessing of greater analytical and communicating skills.
5. Fitness Center or Gym On-Premises: Employees can be offered workout rooms or full fitness centers at offices and factories as a place to buff up before work, unwind after work, or even during lunch time. Such fitness facilities can also be used by employees’ families without cost and without tax, according to the IRS. Surely, those who work together should work out together, too.
6. Personal Use of Employer-Provided (or Reimbursed) Cell Phones: If your employer provides you with a cell phone that is needed and primarily used for business purposes, and you use it at times for personal purposes, your personal use of the cell phone is now considered tax-free to you. This can save you hundreds, if not thousands, of dollars per year, in this very simplest of ways.
7. Retirement Planning Services: The amount an employer devotes to its employees’ retirement planning services is also deemed a legitimate business expense by the employer and a non-taxable benefit to the employee.
8. Frequent Flyer Miles: Don’t laugh at this one. If you use your personal credit card for business-related travel, even if the travel costs are reimbursed to you your retaining the resultant frequent flyer miles is tax-free. If you presently use a company-issued card, and switch to this method of payment, you may reap a windfall of tax-free reward potentially worth thousands of dollars a year, with which, of course, you can if you wish, fly some more.
9. Moving Expenses: The amount of reimbursed moving costs incurred by employees in moving their homes for the business purposes of their employers is not included in the employees’ taxable income. These include costs of packing, crating, transportation, insurance, shipping, storage, mileage and temporary lodging, among others.
10. Adoption Expenses: Adoption-related services can be very expensive, Employees can now be provided such services by their employers without having to pay any tax on the amount contributed. At this time, the maximum tax-free benefit, if provided by your employer, is $13,190 per child per year. That is no surely not “small potatoes.”
As you can see, these non-taxed “rewards” that employers can provide to their employees can go a long way toward making employees’ lives better. Surely, during a single year few people relocate, go to school, commute and adopt a child. That said, taking the few minutes needed to consider how these non-taxed fringe benefits can be of help to you is surely worth the time and effort.
P.S.: We offer Checklists and Guides for dealing with many employment transitions, including Resigning, Severance, Performance Reviews, New-Job Negotiating, Non-Compete’s, Performance Improvement Plans, and Facing the Merger or Sale of Your Employer. They show you how to prepare for the possible upcoming changes. To review their descriptions, or to obtain your copy, just [click here.] Delivered by Email – Instantly!
SkloverWorkingWisdom™ emphasizes smart negotiating – and navigating – for yourself at work. Negotiation and navigation of work and career issues requires that you think “out of the box,” and build value and avoid risks at every point in your career. We strive to help you understand what is commonly before you – traps and pitfalls, included – and to avoid the likely bumps in the road. Understanding and considering the many tax-free employer-provided benefits is one small – but not insignificant – step in that path to job and career success.
Always be proactive. Always be creative. Always be persistent. Always be vigilant. And always do what you can to achieve for yourself, your family, and your career. Take all available steps to increase and secure employment “rewards” and eliminate or reduce employment “risks.” That’s what SkloverWorkingWisdom™ is all about.
*A note about our Actual Case Histories: In order to preserve client confidences, and protect client identities, we alter certain facts, including the name, age, gender, position, date, geographical location, and industry of our clients. The essential facts, the point illustrated and the lesson to be learned, remain actual.
Please Note: This Email Newsletter is not legal advice, but only an effort to provide generalized information about important topics related to employment and the law. Legal advice can only be rendered after formal retention of counsel, and must take into account the facts and circumstances of a particular case. Those in need of legal advice, counsel or representation should retain competent legal counsel licensed to practice law in their locale.
Sklover Working Wisdom™ is a trademarked newsletter publication of Alan L. Sklover, of Sklover & Company, LLC, a law firm dedicated to the counsel and representation of employees in matters of their employment, compensation and severance. Nothing expressed in this material constitutes legal advice. Please note that Mr. Sklover is admitted to practice in the state of New York, only. When assisting clients in other jurisdictions, he retains the assistance of local counsel and/or obtains permission of local Courts to appear. Copying, use and/or reproduction of this material in any form or media without prior written permission is strictly prohibited. All rights reserved. For further information, contact Sklover & Company, LLC, 45 Rockefeller Plaza, Suite 2000, New York, New York 10111 (212) 757-5000.
Repairing the World,
One Empowered – and Productive – Employee at a Time™
© 2015, Alan L. Sklover All Rights Reserved. Commercial Use Prohibited.