<BLOCKQUOTE><font size="1" face="Arial, Helvetica, Verdana">quote:</font><HR>Originally posted by cambk:
my wife works for a hospital and receives a stipend in each check which she can either receive as salary or apply to a variety of health/insurance policies. my wife decided to apply the stipend to a disability ins. policy. She is now disabled and is receiving payments. Are these payments taxable?<HR></BLOCKQUOTE>
My response:
The IRS has provided a rather lengthy list of fringe benefits that are not subject to payroll taxes, as long as you meet certain rules. For the most part, these benefits are exempt from both FICA and FUTA taxes. Furthermore, they are not taxable to the employee for income tax purposes, so there is no need to withhold income tax on the value of the payments:
health plan payments, including both insurance premiums and payments from health plans for medical expenses, to or on behalf of an employee, employee's spouse, or employee's dependents
long-term care insurance premiums and payments
any sick pay or disability payments made later than six months after the employee last worked for you
payments made on account of retirement for disability or death, including wages earned before the employee died but paid to a survivor after the year of death
employer's contributions to a qualified pension or retirement plan, including profit-sharing, SEP, or SIMPLE plans (employees' elective contributions to retirement plans, such as contributions to 401(k) or SIMPLE plans, are subject to FICA and FUTA taxes but not income tax withholding)
group-term life insurance premiums on policies of up to $50,000 per employee
worker's compensation premiums and benefits
up to $5,250 in non-graduate-school education assistance, regardless of whether the education is job-related, for courses beginning before June 1, 2000.
meals and lodging furnished for the employer's convenience to employees and their dependents
dependent-care assistance, up to $5,000 per employee
services that your business provides to an employee at no additional cost to yourself and that you offer for sale to your customers; generally speaking these are "excess capacity" services like free standby air travel for airline employees, free hotel rooms for hotel employees, etc.
certain employee discounts on the products or services you sell (the discount on services may be up to 20 percent; the discount on products may be as high as your gross profit percentage)
property or services that you provide to an employee and for which the employee would have been entitled to a tax deduction had the employee paid you for the property or services (examples: company car used for business purposes, safety equipment, job training)
benefits that have minimal value, such as occasional parties, occasional supper money or taxi fares when an employee works late, occasional tickets to entertainment or sporting events, use of company telephone or copy machines for personal purposes, etc.
reimbursements for qualified moving expenses; generally this includes the cost of packing and transporting household goods and personal effects, and of transporting the employee and his or her family from the former residence (including lodging en route); the new job location must be at least 50 miles farther from the employee's former home than the old job location, and the employee must work full time for at least 39 weeks during the first 12 months after the move
up to $65 per month per employee in mass transit passes or vanpooling services, and up to $175 per month in parking benefits (these amounts apply for 1999 and are periodically adjusted)
athletic facilities such as a gym or swimming pool located on the business premises, and operated substantially for the use of employees, their spouses, and dependent children
between January 1, 1997 and December 31, 2001, qualified adoption assistance expenses of up to $5,000 per child (or up to $6,000 for certain special needs children) are not subject to income tax withholding, although these expenses are subject to social security, Medicare, and federal unemployment taxes
Timing of payment. For fringe benefits that are taxable, you have some flexibility in designating when the benefits are paid for purposes of determining when your payroll taxes on the benefits are due. In general, you may treat a benefit as having been paid on your regular payday or on any other periodic basis (monthly, quarterly, etc.), provided you treat them as having been paid at least as often as once a year.
IAAL
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