Construction and Real Estate Employers Should Prepare for Year-End Fringe Benefit Reporting
As companies begin to process 2013 Forms W-2, they should be aware of the year-end fringe benefit reporting requirements, because certain fringe benefits must be reported as taxable compensation.
“Many companies aren’t aware of the additional reporting requirements surrounding W-2 reporting for owners, shareholders, and employees,” says Marc Mallory, a construction and real estate manager with CliftonLarsonAllen. “A company may not be allowed specific deductions or may have to re-issue W-2s if they include incorrect or omit information.”
Mallory outlines specific fringe benefits that affect most construction and real estate companies, and how employers should handle reporting these benefits.
Health insurance reporting for S corporation owners
Reporting health insurance fringe benefits for shareholders differs from reporting for employees. For instance, the premium paid on behalf of the S corporation owner must be included as taxable income on their Form W-2. Furthermore, you cannot exclude a more than 2 percent shareholder of an S corporation as an employee for this particular reporting requirement.
This reporting requires all more than 2 percent S corporation owners to report the value of all accident or health benefits in their wages that are subject to federal income tax withholding. (Shares owned by certain relatives must be included in the determination of the 2 percent threshold.) You can exclude the value of these benefits (other than payments for specific injuries or illnesses) from their wages that are subject to Social Security, Medicare, and Federal Unemployment Tax Act taxes.
The additional compensation is included in Box 1 (Wages) of the Form W-2 issued to the S corporation owner.
Using company cars
Personal use of a company car (PUCC) is a taxable non-cash fringe benefit for applicable company owners and employees. Any use of a company car for personal use is considered income for tax purposes. However, if the company car is kept at the business location and only used for business purposes, the business is allowed a deduction for all of the vehicle’s expenses, with no consequences to the employee.
The value of the PUCC should be added to a payroll check for tax purposes, which will then be included in the total amount reported in Box 1 of the W-2.
Ensure that you have properly calculated and documented all PUCC. The cents-per-mile rule is a common method for calculating the value of this fringe benefit. Under this rule, you determine the value of a vehicle provided to an employee for personal use by multiplying the standard mileage rate by the total miles the employee drives the vehicle for personal purposes. For 2013, the standard mileage rate was 56.5 cents per mile.
Other ways to calculate this benefit include the commuting value method and annual lease value method.
“Businesses should regularly communicate with staff who use company cars throughout the year to help them track these expenses. This will help immensely when gathering year-end PUCC information, and avoid surprises to taxable income reporting to employees,” says Mallory.
Generally the total amount deducted over the year for union dues is reported in Box 14 on an employee's W-2, depending on the type and location of the particular union. Even if membership is not required, union dues paid must be included as an information item on the W-2. Companies should consult with their local union representative for further details.
Employees may be able to deduct union dues as an itemized deduction on Schedule A of their federal tax return.
The listed requirements can be reported effectively with proper policies and procedures put in place by a company early in the year.
How we can help
Consult your tax advisor for assistance in calculating, documenting, and reporting your company’s fringe benefits.