Thursday, February 2, 2012
Are your exempt organization’s payroll practices in compliance? Part lll
Posted by Armanino Nonprofit Team
IRS Issues Taxable Fringe Benefit Guide
Last fall I blogged about the IRS’s Employment Tax National Research Program where 6,000 companies (including tax- exempt organizations) will be audited over a three-year period with a focus on payroll reporting practices, fringe benefit reporting and executive compensation. The exempt organization (EO) arm of the IRS supports this initiative and is scrutinizing tax-exempt organizations for compliance.
In January 2012 the IRS issued its Taxable Fringe Benefit Guide, a guide for governmental agencies to use to make sure fringe benefit reporting practices are in compliance. Even though the guide indicates that its intent is to provide only basic information, it can serve as a useful tool for employers (including nonprofit organizations). You can find this guide at:
Nontaxable fringe benefits provided by nonprofit organizations often include qualified tuition reductions, meals or lodging for the employer’s convenience, educational assistance programs, qualified employee discounts, working condition fringe benefits and qualified transportation expenses. For a fringe benefit to be nontaxable, the employer must determine that certain requirements are met (which can include written documentation). This guide can be a helpful resource when reviewing related compensation practices.
To bullet proof your organization in case of an audit, we recommend that expense reimbursement practices also be reviewed. This guide reviews the reporting rules for accountable and nonaccountable plans, etc.
What’s the bottom line? If you haven’t already, now is the time to review your organization’s compensation practices including the proper reporting of taxable fringe benefits. The IRS’s Taxable Fringe Benefit Guide is a resource available to assist with this process. If your CPA hasn’t discussed this area with you yet, now is a great time to reach out.
Nonprofit organizations have specialized audit, tax and operational needs that require specialized service. Armanino has been committed to the nonprofit sector since 1953, and we now work with more than 500 nonprofit clients. This hands-on experience gives our staff of CPAs and former CFOs a deeper understanding of the issues nonprofits face, so we’re able to meet their needs and help them fulfill their missions in the most efficient, cost-effective way possible.