According to this U.S. Chamber of Commerce article published on June 3 of this year, there is still a massive employee shortage facing businesses today. In fact, according to the article, even if every unemployed worker filled an empty job, there would still be 5.4 million jobs left vacant. That is a staggering statistic and might explain why current recruitment strategies have titles like “Winning the War for Talent” and why why “quittok” went viral this year.

This gap in the workforce has put a greater need for owners and hiring managers to create enticing benefits packages that bring in top talent and retain skilled workers, all while still benefitting the company. One way to do that is to utilize fringe benefits that don’t have to be declared by the employee for tax purposes and are often still a write-off for the employer.

Fringe Benefits: What they are and why you need them

Fringe benefits are additions to a salary that can supplement a worker’s pay.

Most fringe benefits ARE taxable, but there is a specific list of exclusions. That is where we will be concentrating. Most of this information can be found on the IRS website, but we’ve included a handy downloadable PDF for you to reference.

This section discusses the exclusion rules that apply to fringe benefits. These rules exclude all or part of the value of certain benefits from the recipient’s pay.

In most cases, the excluded benefits aren’t subject to federal income tax withholding, social security, Medicare, federal unemployment (FUTA) tax, or Railroad Retirement Tax Act (RRTA) taxes and aren’t reported on Form W-2.

This section discusses the exclusion rules for the following fringe benefits.

• Accident and health benefits. 
• Achievement awards.
• Adoption assistance.
• Athletic facilities.

• De minimis (minimal) benefits. 
• Dependent care assistance.
• Educational assistance.
• Employee discounts

• Employee stock options.
• Employer-provided cell phones.
• Group-term life insurance coverage. 
• HSAs.
• Lodging on your business premises. 
• Meals.
• No additional cost services.
• Retirement planning services.
• Transportation (commuting) benefits. 
• Tuition reduction.
• Working condition benefits.

Professional Help

Sometimes, the best way to maximize your benefits package for your employees and ensure you are meeting all the requirements the IRS has put in place is to utilize a professional. Having a CPA or accountant helping you well before tax time can not only make submitting taxes easier (and often cheaper to file), but it also ensures you get your maximum write-offs and maximize your other benefits, like employee benefits packages.


Be sure to check back next week as we continue this series with our top choices in tax-free fringe benefits to supercharge your employee benefits.