Employee Benefits

In today's competitive job market, an attractive employee benefit package can be a useful tool to help you recruit new employees and retain those that are crucial to your company's success. In addition, the tax benefits you can receive by offering your employees’ benefits are twofold: First, the costs of providing employee benefits are sometimes tax deductible as a trade or business expense. Secondly, the value of the benefits that you provide to your employees may be excludable from your employees' gross income, reducing your taxable payroll. A reduction in your taxable payroll decreases your matching payments of Social Security and Medicare taxes, as well as unemployment taxes.

Types of employee benefits:

Employee benefits can come in either the form of cash or noncash benefits, also known as fringe benefits. Both types of benefits can help your employees meet needs that otherwise could not be met. In addition, providing your employees with benefits can result in significant tax savings. The IRS allows you to deduct the costs of providing your employees with both cash and noncash benefits if they qualify as a trade or business expense. In addition, certain benefits are excludable from your employees' gross income, reducing your taxable payroll. Finally, if you do provide your employees with benefits, the IRS requires that the value of the benefits be reasonable.