Additional Programs You Can Implement for Your Employees, and How to Deduct Them!
Laura wants to explore some other options that are available to assist her employees, but she wants to make sure that she can deduct them at the end of the year when she files her taxes. She knows that some employers offer fringe benefits and programs for education, accidental and health insurance, and sometimes even issue stock. Laura also needs to better understand how and when she should reimburse for miscellaneous expenses.
Laura has learned from a previous post that some fringe benefits are no longer allowed to be deducted. Laura would really like to take her employees to a Broadway show after they attend a trade show in New York, but without that deduction she is not sure if she should add this into her budget. In prior years, a deduction could be taken for entertainment as long as it was directly before, during or after a business event. Beginning in 2018, that deduction has expired.
Keisha and Taylor are two of Laura’s employees that would like to go back to school part-time, but they are not sure if they can afford it. Laura believes in the value of an education, but she wants to make sure that if she provides tuition assistance, the cost will be deductible and that her employees will stay with her after they benefit from the experience. Educational expenses can be paid by Laura for her employees if the payments are part of a qualified educational assistance program. A written tuition assistance policy outlining how payment will be made, as well as the length of employment after the course has been completed is necessary for both of Laura’s concerns.
Accident and health plans are common for larger companies, but not necessarily for small businesses. If Laura decides to provide this coverage for her employees, generally the expense will be deductible. Life insurance is also a very common program to offer, Laura just needs to make sure that the cost of life insurance for herself or anyone else that has a financial interest in her business, is excluded from the deductible amount.
Yesterday, one of Laura’s employees, Sandra, picked up some supplies and turned in an expense form to be reimbursed. When an expense is reimbursed it will fall into one of two categories; an accountable plan, or a nonaccountable plan. The accountable plan will be any expenses incurred for the business. A nonaccountable expense will be deducted as wages and Laura will need to include it in the employee’s W-2. Here is another area that implementing a written policy will ensure that employees are not making un necessary purchases and Laura will be able to deduct the reimbursable item.
If Laura had organized her business to have shares of stock, she could transfer some of the stock to an employee for payment of services in her salon. The fair market value of the stock on the date of transfer would be deducted as wages and reported on the employee’s W-2.
Now that Laura has a better idea of the methods of compensation and how to deduct the expenses, she can begin writing policies for her salon to keep her employees happy and grow her business.
Let us know if we can help you determine the deductions for your business. Contact us at firstname.lastname@example.org or 407-988-5647.
Categories: Tax Information