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| Hiring, Terminations and Retention |
| Tax Questions: Temporary accounting staff may be an economical solution |
The beginning of a new tax year presents a great opportunity for a business to consider temporary accounting help. Your current staff may be overburdened with month end closes, sales tax issues, asset depreciation and payroll issues, or you may be a small business that needs help getting the financial aspects of your business in order for the new year. If you require a lot of tax guidance, a temporary in-house tax consultant might be an economical alternative to expensive advice from a CPA firm.
One aspect of taxation that sometimes slips through the payroll system is taxable fringe benefits. Are you required to collect tax on the $100 year-end bonus you gave your receptionist? What about the gift basket you gave her for Secretary’s Day?
During an audit, the IRS will be looking for evidence that your company paid taxes on fringe benefits as evidence that your company handles other “weightier” tax issues appropriately. The Small Business Taxes and Management website recommends that the best way to manage taxing fringe benefits is to consult with a tax advisor before you begin offering them, since withholding can become difficult if you’ve already paid the reimbursement or benefit.
The website cites several examples for taxation of fringe benefits:
- Educational assistance for all courses is generally exempt (up to $5,250 of benefits per year), but only if the company has a written plan. Must be nondiscriminatory.
- Educational assistance for courses related to the company's business is exempt without limit and no written plan is necessary.
- Employee discounts are allowed but subject to limitations. Discounts in excess of the limit are taxable.
- Moving expense reimbursements are generally exempt if the expenses would be deductible if the employee had paid them.
- Achievement awards are generally exempt (up to $1,600), but must meet certain requirements.
- Cash gifts such as $100 at Christmas, etc. are generally taxable. Small property gifts such as a Christmas turkey are not.
- Meal money provided to employees is taxable unless it meets one of several criteria.
- Dependent care up to $5,000 is generally exempt.
- Personal use of a company care is taxable unless it falls under a de minimis exception (e.g., a short side trip on company business)
See http://www.smbiz.com/sbwday.html for more information. Please contact a member of our staff for answers about how temporary accounting staffing can help you sort out tax issues so that your employees can concentrate on core issues that keep your company productive.
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