Question

Accounting Question (Fringe Benefits)

You are the Tax Director of a large public company. The CFO is very frugal and is looking for fringe benefits that will be viewed favorably and provide incentives to employees and executives, but perhaps not cost the company very much. A consultant has provided the CFO a list of the following possible employee fringe benefits, and has claimed that all the benefits are tax free to the employee and deductible to the company. (He does not have a degree from Kogod). Do you as Tax Director agree?

List of "Concierge" and Other Innovative Fringe Benefits:

1. 1 Times Pay Group Term Life Insurance with the ability to purchase up to 3 Times Pay

2. On-site gym

3. On-site daycare or emergency day care option

4. Paid sabbaticals

5. On-site beauty salon

6. Car cleaning

7. First class airfare on business trips

8. Free cell phones

9. Pet-friendly perks (1. pet medical insurance and 2. bring to dog to work day, etc.)

10. Fun and games - foosball and pool tables in break rooms

11. Treadmill desks

12. Free food (color coded for most to least nutritious) (Google)

13. Discounts on what you do or produce (goods 80% / services 50%)

14. Cash and in-king perks with FMV of $50 from corporate credit cards and travel operators

15. Free retirement seminars from professionals (retirement planners, wills and estate advice)

16. Pizza Fridays/Bagel Mondays

17. Movies - group movie outings or free passes

18. Employee Service Awards (274(j) plans) - for service and/or longevity

19. Employee awards - points toward an item in a catalog (e.g., I-Pad)

20. "Lucky Draw" - participate in company film-making and public relations materials

21. Company rock band

22. Food trucks on campus

23. Working sabbaticals at other company locations

24. Lactation consultant, nursing mom's rooms equipped with a refrigerator

25. Employee Assistance Program: 3 free therapy sessions, concierge services, etc.

Answer 1

As a Tax director of a large public company, I will not agree that all fringe benefits are tax-free to the employee and deductible to the company. Any benefits provided by the employer excluding salary and wages are taxable unless exemption is made in the Income-tax act.

1.1 Times Pay Group Term Life Insurance with the ability to purchase up to 3 Times pay: exemption in tax

2. On-site gym: exempted in Income tax for the employee because it is the benefit for all employees.

3. On-site daycare or emergency daycare option: exempted in Income tax for the employee

4. Paid sabbaticals: exempted in Income Tax for the employee

5. On-site beauty salon: exempted in Income Tax for the employee because it is the benefit for all the employees.

6. Car cleaning: If allowances are paid it is taxable and if reimbursement made it will not taxable for the employee and will be reflected in expenses.

7. First-class airfare on business trips: It is the expense of the company and not taxable for employees.

8. Free cell phones: if it is reimbursed the not taxable.

9. Pet-friendly perks (1. pet medical insurance and 2. bring to the dog to work day, etc.): Not taxable for individual employees because it is for all.

10. Fun and games - foosball and pool tables in break rooms: Not taxable it is a benefit for all.

11. Treadmill desks: Not taxable it is a benefit for all the employees.

12. Free food (color-coded for most to least nutritious) (Google): Not taxable for the employee.

13. Discounts on what you do or produce (goods 80% / services 50%): Not taxable for the employee because it is the indirect benefit to all the employees.

14. Cash and in-king perks with FMV of $50 from corporate credit cards and travel operators: Not taxable for the employee because it is the business need.