Payroll 101: What is Fringe Benefits

by admin 19. November 2012 10:28

A fringe benefit is a form of pay (including property, services, cash or cash equivalent) in addition to stated pay for the performance of services. Some forms of additional compensation are specifically designated as “fringe benefits” in the Internal Revenue Code.

Fringe benefits commonly include health insurance, group term life coverage, education reimbursement, childcare and assistance reimbursement and cafeteria plans. Fringe benefits for employees are taxable wages unless specifically excluded by a section of the Internal Revenue Code (IRC).

The IRC may provide that fringe benefits are nontaxable, partially taxable, or tax-deferred.

Taxable – Includible in gross income unless excluded under an IRC section. “Taxable” means the benefit is included in the employees' wages and reported on Form W-2, Wage and Tax Statement, and generally is subject to Federal income tax withholding, social security (unless the employee has already reached the current year social security wage base limit), and Medicare. If the recipient is an employee, this amount is includible as wages. For example, bonuses are always taxable because no IRC section excludes them from taxation


Nontaxable (excludable) – Excluded from wages by a specific IRC section; for example, qualified health plan benefits excludable under section 105.


Partially taxable - Part is excluded by IRC section and part is taxable. Benefits may be excludable up to dollar limits, such as the public transportation subsidy under IRC §132.

Tax-deferred – Benefit is not taxable when received, but subject to tax later. For example, employer contributions to an employee's pension plan may not be taxable when made, but may be taxed when distributed to the employee.


ezPaycheck small business payroll software can handle fringe benefits. It comes with default settings for health Insurance and 401K. Users can also add customized deduction fields to handle taxable or non-taxable fringe benefits easily. Learn more at

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IRS Increases 401(k) Limits For Year 2012

by admin 24. October 2011 11:17

IRS Increases 401(k) Limits to $17,000 in 2012, up from $16,500 this year. The increase is required by law to adjust for inflation. The ceiling hadn't grown since 2009 because inflation had been too low to trigger an increase.

Highlights include:


  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $16,500 to $17,000.
  • The catch-up contribution limit for those aged 50 and over remains unchanged at $5,500.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $58,000 and $68,000, up from $56,000 and $66,000 in 2011.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $92,000 to $112,000, up from $90,000 to $110,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $173,000 and $183,000, up from $169,000 and $179,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $173,000 to $183,000 for married couples filing jointly, up from $169,000 to $179,000 in 2011.  For singles and heads of household, the income phase-out range is $110,000 to $125,000, up from $107,000 to $122,000.  For a married individual filing a separate return who is covered by a retirement plan at work, the phase-out range remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contributions credit) for low-and moderate-income workers is $57,500 for married couples filing jointly, up from $56,500 in 2011; $43,125 for heads of household, up from $42,375; and $28,750 for married individuals filing separately and for singles, up from $28,250.


Federal income tax tables:

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