The IRS has released the 2023 final version of its Publication 15-B (The Employer’s Tax Guide to Fringe Benefits).
The “What’s New” section of the publication includes information on the 2023 business mileage rate under the “cents-per-mile rule,” the monthly exclusion for qualified parking and commuter transportation benefits, and the contribution limit on a health flexible spending arrangement (FSA).
There is a table on page 6 of the publication that summarizes the differences in the treatment of various fringe benefits for federal income tax withholding (FITW), Social Security and Medicare (FICA), and federal unemployment tax (FUTA) purposes.
For example, payments from an employer’s adoption assistance plan that meet certain requirements are not subject to FITW. However, the payments are subject to FICA and FUTA tax.
- Qualified parking exclusion and commuter transportation benefit. The monthly exclusion for qualified parking is $300, and the monthly exclusion for commuter highway vehicle transportation and transit passes is $300 in 2023.
- Contribution limits for health flexible spending arrangements (FSAs).A cafeteria plan may not allow employees to request salary reduction contributions to health FSAs greater than $3,050 in 2023.
The Burden is With Employers
Employers must generally determine the value of noncash fringe benefits no later than January 31 of the next year. In addition:
- Before January 31, employers may reasonably estimate the value of the fringe benefits for purposes of withholding and depositing on time.
- Employers may be subject to a penalty if they underestimate the value of the fringe benefits and deposit less than the amount that they would have had to deposit if the applicable taxes had been withheld.
- If employers overestimate the value of the fringe benefit and over deposit, they may either claim a refund or have the overpayment applied to their next Form 941.
As with all things IRS-related, make sure you know the rules. Your advisor can help.
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