Make tracking taxable employee benefits easier

CEOs must not only recognize the importance of offering enticing Taxable Employee Benefits (TEB) but must also look for the best tools to help them report these offerings to the IRS, cautions Isaac Saft, Founder and CEO of Blue Dot


here have been drastic changes in the workplace environment and talent acquisitions recently. With the impact of the Great Resignation, coupled with the accelerated adoption of work-from-home, CEOs may find themselves in a challenging position when trying to attract and retain top talent. Offering enticing employee benefits, such as outfitting employees with home office equipment and furniture, are a fantastic way to keep employees happy and engaged. With these additional offerings comes a responsibility to properly report any Taxable Employee Benefits (TEB), otherwise known as fringe benefits, to the IRS. CEOs must not only recognize the importance of offering enticing TEB but must also look for the best tools to help them report these offerings to the IRS to reduce their exposure risk.

Isaac Saft
Founder & CEO, Blue Dot

Why Taxable Employee Benefits are increasingly relevant 

TEB are becoming a more regular and permanent facet of employing staff. As hybrid and work-from-home schedules are embraced, employers are setting up home offices for employees including things such as providing computers, printers/scanners, subscriptions to necessary connectivity tools, internet access and more. With companies needing their staff to be able to fully work remotely, expenses that had previously been nonexistent are now provided to employees as part of their work-from-home setup. Not only that, but this type of work structure allows CEOs to hire people not local to their offices. Many CEOs have found in recent years, that the right new hire fit for a vacated role is outside a reasonable commute radius. Because of the accelerated embrace of work-from-home, employees can work out of state or even out of the country, and still be productive members of the team.

In addition to home offices, other TEB are still relevant including employee vehicles, mileage reimbursement, bonuses or stock options, travel and meals and some educational reimbursements. As the variety of TEB expands, so does the employer’s responsibility to correctly document and report these items to the IRS.

Compliance is a complicated endeavour

TEB are complicated with rules changing from year-to-year, state-to-state and for out of country employees. As all CEOs know, compliance with IRS regulations is imperative, as no one wants to run afoul of the agency either on purpose or accidentally. There’s also a lengthy list of excluded TEB. On top of that, some TEB can be included in percentages, and anything provided for a home office is only 100 percent excluded if the employee uses it solely for work, which is very unlikely. With any personal use, a percentage needs to be implemented. For example, if a CEO provides an employee with internet, the full cost of the internet is only excluded if the employee uses that internet 100 percent for work (which we all know won’t be the case). If they use it 75 percent for work and 25 percent for personal use, that 25 percent of personal use is taxable to the employee.

Additionally, some TEB are on both the taxable and excluded lists from the IRS, and their inclusion depends on the situation in which they are being provided as well as the location of the business. With so many rules and regulations to track and the increasing use of TEB over the past couple years, it’s no wonder that many CEOs are looking for a solution to make reporting and tax management easier.

Why a technology-first approach is best

CEOs can reduce their exposure risk and gain insights by embracing a technology-first solution. Even with the complicated TEB rules, a fully integrated system that includes the collection of data, usage statistics, and offers with completely customisable parameters, will allow CEOs to remain compliant without the worry or confusion of human error. CEOs should look for a technology solution that is intuitive and easy for the accounting team to use, and that will also offer artificial intelligence capabilities to identify and highlight actionable insights based on patterns and previous activity.

Another important thing to note is that the IRS is also embracing a technology-first approach and has begun automating and tapping technology tools to help them review and audit filings. A company that is on the same level as the IRS with a technology-first solution has a greater chance of staying compliant and reducing the risk of having errors in their tax documentation.

Technology solutions make offering TEB easier

The inclusion of TEB has become almost imperative as CEOs manage the new way that the workforce is structured. While some TEB may have been offered to employees before, today’s work-from-home environment has made these perks both more common and increasingly critical for a large portion of employees. To confirm that all TEB are reported correctly to the IRS, and to be able to gain insights and data from reporting, CEOs will find that a technology-first solution will not only facilitate their ability to be compliant, but also will help them keep up with an increasingly technology-focused IRS.