You can get more out of your business by taking advantage of fringe benefits and employee benefit plans. As an employee in your own company, you can participate in any employee benefit plans that your company offers. You can also take advantage of tax-advantaged executive fringe benefit programs, including company cars.
Participating in Employee Benefits Programs
You can participate in any of the employee benefit plans that your company offers to its employees as a group. Participation in such plans, including employee fringe benefit plans, can provide you with vision care insurance, dental insurance, adoption assistance, disability insurance, or legal services, to name a few.
Some employee benefit plans, such as certain group life insurance plans, fall under the heading of welfare benefit plans. These plans are subject to ERISA (the Employee Retirement Income Security Act of 1974) and, as such, are not permitted to discriminate in favor of executives or other highly compensated employees. In other words, if your company offers the plan to you and other highly paid executives, it must also offer the plan to all of your employees. Provided every employee has the same opportunities and advantages under the plan, you are free to benefit as well.
Caution: If you are the owner of more than 2 percent of the stock of an S corporation, you cannot exclude certain fringe benefits from income.
Participating in Tax-Favored Executive Fringe Benefit Programs
There are a number of tax-favored fringe benefit programs that your company may offer to you and other highly paid company employees. These include the following:
- Business-related working-condition fringe benefits
- Convenience-related meals and lodging
- De minimis fringe benefits
- Insured health-plan coverage
- Athletic facilities
- Qualified parking
- Qualified bicycle commuting
Because a corporation is permitted to offer these programs on a selective basis, you can take advantage of them without offering them to all employees.
Expenses Paid by the Company
Some expenses, such as club dues, may not be a deductible business expense for your company. However, if the company pays the expenses directly, (rather than in the form of a reimbursement), you may be able to receive the benefit as a qualifying working-condition fringe benefit. Your company will not be able to deduct the expense, but you will not have to claim the value of the benefit as income. However, if your corporation pays for your personal expenses, these payments will be treated as deemed dividends.
Company Cars
To the extent a company car is used for business purposes, you can exclude this fringe benefit from income as a working-condition fringe benefit. However, unreimbursed personal use of a company car (which includes commuting) is treated as a taxable fringe benefit to you and is reported on your Form W-2.
If you have questions, contact the experts at Henssler Financial:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166
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