SPRAYFOAM Professional - Spring 2015 - (Page 37)

FILING TAXES WHAT YOU NEED TO KNOW BEFORE YOU FILE IN 2015 BY KENDALL COLEMAN T he IRS is known for cyclical "crackdowns": periodically selecting a particular rule or regulation and strictly enforcing it for a few tax cycles in order to reset the bar. Over the past few years the IRS has applied a laser-focus to a number of issues that directly affect construction: misclassified workers (independent contractor versus employee), I-9 violations, and most recently, fringe benefits. WHAT IS A FRINGE BENEFIT? A fringe benefit is an extra benefit that goes beyond an employee's salary. A company car, reimbursed meals, reimbursed mileage - all of these common industry expenses are considered fringe benefits. While executives and managers typically see these reimbursements or "perks" as normal parts of business, according to the IRS some of these fringe benefits should be considered part of an employee's income and are thus taxable. It's easy to be confused about which fringe benefits are taxable as compensation to the employee. For example, auto and fuel reimbursements are typically taxable to the employee. But, if the employer adopts an "accountable plan," then many fringe benefits, such as auto, fuel and meal allowances, may be taxfree to the employee. An "accountable plan" essentially refers to the process of responsible expense reporting: the employee reports expenses incurred while performing services for the employer and the reimbursed amount must match the expenses reported. If not, the IRS will deem those reimbursements as taxable to the employee. WHAT'S THE RISK OF ACCOUNTING FOR FRINGE BENEFITS INCORRECTLY? The risk of misclassifying and failing to claim fringe benefits properly can be costly and time consuming, even if the total amount of the benefits isn't a substantial amount. The IRS will re-characterize the fringe benefits as compensation, which will be subject to payroll taxes. The employer will receive a bill from the IRS for the employer's match of payroll taxes, and the W-2s, W-3s and 941s will need to be amended by the employer. The employee will also have to amend his or her individual tax return. If an outsourced payroll company is involved, this process can be resourceintensive and expensive. WHAT ABOUT 1099 EMPLOYEES WHO RECEIVE FRINGE BENEFITS? If an employer issues fringe benefits to 1099 employees, there's a greater likelihood that those benefits will be misclassified. Typically, the employer provides payment for fringe benefits in a separate check - not with payroll. As a result, the payroll department is not aware of the payment when time comes to prepare the W-2s and 941s and omits the payment from the payroll filings. In an effort to be compliant, many employers will issue the employees a separate 1099 for the value of the benefit. The www.sprayfoam.org | SPRAYFOAM PROFESSIONAL 37 http://www.sprayfoam.org

Table of Contents for the Digital Edition of SPRAYFOAM Professional - Spring 2015

Executive Director’s Corner
President’s Post
Foam Business News
SPFA Today
Industry by Design
Legislative Update
Why I Support SPF
Safety First
Energy Codes and the Benefits of SPF
Behind the Foam
SPF Industry Prepping for Code Changes in Sweden
How to Make Money and Have Fun Doing It
What You Need to Know Before You File in 2015
Tips on Spraying Foam – Are You Doing It Right?
Choosing the Right Strategy for Complex Construction Claims
10 Ways Your Company Can Use Instagram
Ask the Expert
Calendar of Events
Index of Advertisers/ Advertisers.com

SPRAYFOAM Professional - Spring 2015