As ministries search for ways to enhance employee compensation packages, ministry leaders and employees should understand the tax repercussions of fringe benefits.
The following information provides a basic understanding of alternative forms of compensation. However, ministry leaders should discuss fringe benefits with their locally licensed attorney or certified public accountant before adding them to their ministry’s compensation packages.
According to the IRS, a fringe benefit is "a form of pay for the performance of services."1 Fringe benefits can range from clothing allowances to company cars. Here are some common examples:
Any fringe benefit an employee receives is taxable and must be included in the employee's pay (gross income), unless the law specifically excludes it. Any benefit not excluded under the rules is taxable.
In most cases, the general valuation rule determines the value of a fringe benefit. However, in special cases, the IRS uses the special valuation rule to determine the value of certain benefits.1
Here's how to determine the fair market value of some common fringe benefits:1
Employer-provided vehicles
Cell phones
Educational assistance
Dependent care assistance
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2023 Brotherhood Mutual
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2023 Brotherhood Mutual