Fringe Benefits Teleconference Series Part II: De Minimis Fringe Benefit Exclusion under Code Section 132(e)
Miller & Chevalier held Part II of an invitation-only teleconference to provide an overview on the de minimis fringe benefit exclusion under Code section 132(e). In addition, the speakers discussed some of the issues that IRS auditors routinely target, such as the problems associated with providing gift cards, employee-raffles and awards, occasional meals, sports tickets and when an item should be considered "too valuable."
Earlier this year, we alerted our clients regarding the IRS's announcement that it will audit 6,000 U.S. companies to determine whether they pay all their required employment taxes to fund Social Security and Medicare benefits. The IRS indicated that the primary focus of the National Research Program Initiative (NRP) examinations will be worker classification (i.e., whether service providers are being properly classified as independent contractors) and the tax treatment of fringe benefits. The audits will occur over a three-year period and companies are being chosen at random.
The IRS will consider a taxpayer's prior efforts to correct benefits issues or withholding procedures in assessing whether penalties are appropriate for back years. Therefore, we strongly recommend that our clients take steps now to comply with IRS requirements prior to being selected for audit. Even those clients who are fortunate enough not to be selected for the NRP examinations may find that "regular" payroll tax audits will involve an in-depth review of almost all the client's fringe benefit programs. In this regard, we have had a number of clients who have recently experienced "regular" payroll tax audits in which the IRS has issued an exhaustive list of IDRs on nearly every fringe benefit conceivable. Internal compliance reviews can mitigate the pain of these "regular" payroll tax audits too.