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Basic Income Tax: Settlements Employee Fringe Benefits.


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Basic Income Tax: Settlements Employee Fringe Benefits. Professor Jack Williams. Compensation for Injury and Sickness. General Rule: Settlement and Court Awards are Gross Income.
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Fundamental Income Tax: Settlements Employee Fringe Benefits Professor Jack Williams

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Compensation for Injury and Sickness

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General Rule: Settlement and Court Awards are Gross Income IRC §61 and Glenshaw Glass (1955): Income is just "an irrefutable promotion to riches." Congress planned "to apply the full measure of its exhausting influence." Rule 1: Damages recompensed by virtue of lost benefit are GI Rule 2: Recovery for property harm is measured against the premise of property to decide increase or misfortune Rule 3: Damages to recoup bit of goodwill are an arrival of capital and are rejected from GI Rule 4: Conversion of property to money, notwithstanding, may bring about the acknowledgment of addition Rule 5: Damages got because of individual physical wounds or infection is avoided from GI

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Damages: Business or Property Damages Raytheon (1944): "in lieu of what were the harms honored?" Damages for lost benefits are assessable as gross pay Damages to property – recuperation for such harms will be measured against the premise of the property to decide acknowledged addition

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Damages: Personal Physical Injury or Sickness (Section 104) §104(a)(2) prohibits from GI any harms got, whether by suit or assention, as a single amount or occasional installment, by virtue of individual physical wounds or affliction (that is, tort or tort sort rights). Reg. §1.104-1. Run of the mill cases: Battery Title 7 claims Typical special cases to avoidance: Emotional Distress Punitive harms GR: Key is to show starting point of case lies in a physical harm and the case is not generally assembled under "passionate trouble." Thus, law prohibits all harms proposed to remunerate a citizen for a physical damage and the results, including monetary outcomes, spilling out of that damage.

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ACCIDENT AND HEALTH INSURANCE GR: §104(a)(3) gives that installments got through the mischance or medical coverage approaches are barred from GI, gave that the strategy was not financed by the Tp's manager or by boss commitments not includable in the Tp's wage. Tp financed through after-expense dollars!!! Special case: Not so with boss financed plans, which are represented by §105. Area 105(a) by and large incorporates these installments in representative's GI. Exemption to special case: §105(b) and (c)

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Methodology Key: ALLOCATION!!! Installments FOR PAIN AND SUFFERING Is there an individual damage? Are there harms? Repaid MEDICAL EXPENSES

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Methodology cont'd FUTURE MEDICAL EXPENSES LOST WAGES PUNITIVE DAMAGES DAMAGE TO PROPERTY PAYMENTS FROM INSURANCE POLICIES Personal protection Employer financed protection

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Definition: Fringe Benefit The term is utilized to depict a financial advantage, other than a money pay or wages, that is given to a worker by her manager as pay for administrations.

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Fringe Benefits

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Tension No blessings in the occupation setting amongst boss and worker Concern is that any blessing is in reality masked remuneration Thus, any incidental advantages got in association execution of your administrations are incorporated into your wage as pay Limited special case to general standard for "incidental advantages" and where representative pays equitable quality for such advantages

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Fringe Benefit: Example B, a representative of X, gets a pay in addition to the rent free utilization of a home possessed by X. X does not oblige B to live there and there is no relationship between the home and work. Must B incorporate the estimation of the home in his gross wage?

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Fringe Benefit: Answer General Rule: Fringe Benefits constitute gross pay under §61(a). Review that the type of receipt or of pay does not make a difference under Treas. Reg. §1.61-1(a).

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Exception to General Rule to Include Fringe Benefits in Gross Income Where the Internal Revenue Code gives generally . . . Suppers and Lodging No extra cost administrations Qualified representative rebates Working condition periphery De minimis periphery Qualified transportation periphery On-premises athletic offices Qualified educational cost diminishments (Chapter 6) Qualified moving cost repayment (Chapter 18)

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Meals and Lodging: Meals Section 119: An avoidance from gross salary is given to a worker to dinners and cabin accommodated the comfort of the business on the business' premises Does exclude a money remittance – must be suppers Includes representative, life partner and wards

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Meals and Lodging: Lodging Section 119: Lodging must be outfitted on the's business premises at the accommodation of manager and as a state of livelihood

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Section 132 Fringe Benefits No extra cost administration Qualified representative markdown Working condition periphery De minimis periphery Qualified transportation periphery On-premises athletic offices Qualified educational cost decreases (Chapter 6)* Qualified moving cost repayment (Chapter 18)

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No Additional Cost Services Elements: Service must be offered to clients in customary course of the business' line of business in which the representative is performing administrations Employer brings about no extra cost (counting renouncing incomes) in giving the support of the representative Generally boss must give qualifying administration; in any case, two or more managers in same business may go into composed proportional understanding two permit each to utilize the administration.

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Qualified Employee Discounts If a citizen purchases products or administrations for not as much as equitable worth as type of pay, then the distinction is incorporated into pay unless the distinction qualifies as a perceived representative rebate. On the off chance that the contrast between the honest estimation of the property or administrations and that which a citizen paid is a qualified worker rebate, then a citizen does not take the distinction into salary Basis in property is equivalent to equitable worth

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Qualified Employee Discount - Property: Definition Exclusion re qualified property may not surpass a sum equivalent to the gross benefit rate of the cost at which the property is offered available to be purchased to clients Discount in overabundance of gross benefit % is wage Gross benefit rate is basically the business' normal imprint up on merchandise Gross Profit Percentage = (absolute deals – expense of products)/aggregate deals

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Qualified Employee Discount - Services: Definition Exclusion of a representative markdown concerning qualified administrations may not surpass 20% of the cost at which the administrations are offered to the clients in standard course of business, paying little heed to gross benefit %. Markdown in abundance of 20% is salary

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Working Condition Fringe Gross wage does exclude the estimation of any property or administrations gave to a representative by her boss to the degree that, if the worker paid for the property or administrations herself, she would be qualified for a conclusion under the Internal Revenue Code. Case: Employer gives exchange diary memberships. Expense of exchange diary is prohibited to degree representative would have possessed the capacity to deduct cost.

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De Minimis Fringe If business gives item or administration and the expense of it is small to the point that it would be absurd for the business to represent the thing or administration, the quality is excluded in your pay. Cases: Discounts at organization cafeteria on or close premises where charge is about equivalent to cost Cab admissions home when working extra time Company picnics Free refreshments (espresso, tea, pop)

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De Minimis Fringe cont'd Recurring circumstance: "Story of the Holiday Gift!" If your manager gives you a turkey, ham, or other thing of ostensible worth for an occasion, citizen does not take the estimation of the blessing into pay. On the off chance that business gives you money, a blessing endorsement, or a thing that can without much of a stretch be traded for money , citizen must incorporate the estimation of the blessing as compensation or wages paying little heed to sum.

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Qualified Transportation Fringe If manager gives citizen a qualified transportation incidental advantage , it can be avoided from your wage, up as far as possible. A qualified transportation incidental advantage is: Transportation in a suburbanite expressway vehicle (for instance, a van) between your home and work Transit pass Qualified stopping

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Transportation Fringe cont'd Cash repayment by your boss for the above costs under a true blue repayment plan is excludable. Nonetheless, money repayment for a travel pass is excludable just if a voucher or comparative thing that can be traded just for a travel pass is not promptly accessible by direct appropriation to citizen

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Limit on Benefit For Commuter Highway Vehicle : Cannot surpass $100 every month For Transit Pass : Cannot surpass $100 every month For both Commuter Highway Vehicle and Transit Pass: Cannot surpass $100 every month in total For Qualified Parking : Cannot surpass $195 every month Any sums in overabundance must be take into gross wage Any trade got out lieu of Qualified Transportation Fringe is pay

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Commuter Highway Vehicle Highway vehicle Seats no less than 6 grown-ups (barring driver) At slightest 80% of the mileage must be sensibly anticipated that would be: For transporting representatives amongst home and work and On treks which workers involve in any event half of the vehicle's grown-up seating limit (excluding the driver)

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Transit Pass Any pass, token, farecard, voucher, or comparative thing qualifying a man for ride mass travel (open or private) free or at a diminished rate or to ride in a suburbanite thruway vehicle worked by a man in the matter of transporting people for pay.

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Qualified Parking gave to a representative at or close to the business' place of business. Stopping additionally gave on or close to an area from which the worker drives to work mass travel, in suburbanite