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    Taxable and Non-Taxable Benefits

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    lia ziegler
    Malik wants to provide benefits to attract and retain employees but is concerned about tax implications. There are taxable benefits like company cars and club memberships that are taxed at fair market value and increase employee and employer taxes. However, there are also non-taxable benefits like health insurance, retirement plans, and de minimis benefits that are either fully or partially tax exempt. Malik should focus on non-taxable benefits to support employees without significantly increasing taxes.

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    Taxable and Non-Taxable Benefits

    Uploaded by

    lia ziegler
    112 views10 pages
    Malik wants to provide benefits to attract and retain employees but is concerned about tax implications. There are taxable benefits like company cars and club memberships that are taxed at fair market value and increase employee and employer taxes. However, there are also non-taxable benefits like health insurance, retirement plans, and de minimis benefits that are either fully or partially tax exempt. Malik should focus on non-taxable benefits to support employees without significantly increasing taxes.

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    Taxable and Non-taxable Benefits

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    Malik wants to provide benefits to attract and retain employees but is concerned about tax implications. There are taxable benefits like company cars and club memberships that are taxed at fair market value and increase employee and employer taxes. However, there are also non-taxable benefits like health insurance, retirement plans, and de minimis benefits that are either fully or partially tax exempt. Malik should focus on non-taxable benefits to support employees without significantly increasing taxes.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    112 views10 pages

    Taxable and Non-Taxable Benefits

    Uploaded by

    lia ziegler
    Malik wants to provide benefits to attract and retain employees but is concerned about tax implications. There are taxable benefits like company cars and club memberships that are taxed at fair market value and increase employee and employer taxes. However, there are also non-taxable benefits like health insurance, retirement plans, and de minimis benefits that are either fully or partially tax exempt. Malik should focus on non-taxable benefits to support employees without significantly increasing taxes.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    of 10

    Taxable & Non-Taxable Benefits: Definition & Examples

    Many businesses use benefits to attract and retain skilled workers. Benefits, on the other
    hand, may have tax implications.

    Compensation

    Malik is the owner of a company. He's made it his mission to recruit and retain the best
    workers in the industry, and he's heard that offering benefits to his employees is a good way
    to do so. However, he has heard that providing such benefits may have tax consequences.
    What is the best course of action for him?

    Compensation is what an individual receives in exchange for their labor. It includes a


    worker's salary or wages as well as non-cash income, known as fringe benefits. Malik is
    considering how fringe benefits could favor his workers.

    Depending about what the benefit is and how much it is worth, fringe benefits may be taxable
    or non-taxable. Let's look at taxable and non-taxable benefits to help Malik understand the
    tax consequences of providing generous fringe benefits.

    Taxable Benefits
    If Malik wants to provide his workers with benefits such as the use of a company car or
    membership in a country club, he'll have to pay some taxes. That's because those are
    examples of taxable fringe benefits, which are taxable and must be included in a worker's
    income.

    Some meals, vacation trips, gift cards, event tickets, and club memberships are also taxable
    benefits. These types of benefits are generally taxed at fair market value, which is the amount
    an employee would pay for the benefit if they were to pay for it themselves. It's possible that
    this isn't the same as what the company pays for it.

    For instance, Malik's company might be able to obtain discounted tickets to a big concert.
    They purchase a large number of $300 tickets for just $100 each and then distribute the
    tickets to their workers. Each employee's pay stub would show an extra $300 in earnings,
    which would require withholding. Despite the fact that the company just paid $100, the tick's
    fair market value was $300.

    This is the major disadvantage of taxable benefits: both the employee and the employer must
    pay different taxes on the benefit's fair market value. Taxable benefits, on the other hand,
    have the advantage of boosting potential Social Security benefits for many employers.
    This is because Social Security payments are based on income where it is higher with taxable
    benefits are factored in.

    Non-Taxable Benefits

    Malik is concerned about providing benefits to his workers that would increase their taxes.
    He does not, however, want to exclude all fringe benefits. What should he do?

    Malik could focus on non-taxable benefits that aren't taxed at all or are only partially taxed.
    The Internal Revenue Service (IRS) distinguishes non-taxable benefits into three categories:
    those that are entirely tax-free, those that are income tax-free (but require payment of other
    taxes), and those that are tax-free up to a certain limit.

    Health insurance, retirement services (such as a deferred compensation plan), and de minimis
    benefits (those that cost just a minimal amounts) are examples of tax-free benefits.Let's
    pretend Malik wants to have snacks for his employees at the office.
    For instance, snacks are considered de minimis because they are inexpensive. On those,
    Malik would not be subject to income, Social Security, Medicare, or employment taxes on
    those.

    Other benefits are not subject to income taxes because they are not included in the employee's
    income, but they do require payment of Social Security, Medicare, and/or employment taxes.
    Adoption assistance programs are a good example of this. Assume Malik wants to pay for the
    cost of adoption for any of his employees who wish to adopt a child. Malik contributes
    $15,000 to the adoption of a child by one of his workers. While the employee is exempt from
    paying income tax on that money, the $15,000 would be subject to Social Security, Medicare,
    and employment taxes.
    Philhealth Contribution Table for Direct Contributors

    Year Monthly Basic Salary Premium Rate Monthy Premium

    2019 10,000 2.75% 275

    10,000.01 to 49,999.99 275 to 1,375

    50,000 1,375

    2020 10,000 3.00% 300

    10,000.01 to 59,999.99 300 to 1,800

    60,000 1,800

    2021 10,000 3.50% 350


    10,000.01 to 69,999.99 350 to 2,450

    70,000 2,450

    2022 10,000 4.00% 400

    10,000.01 to 79,999.99 400 to 3,200

    80,000 3,200

    2023 10,000 4.50% 450

    10,000.01 to 89,999.99 450 to 4,050

    90,000 4,050

    2024 to 2025 10,000 5.00% 500


    10,000.01 to 99,999.99 500 to 5,000

    90,000 5,000
    Pag-IBIG Contribution Table for 2021
    Monthly Employee Employer
    Compensation Share Share

    ₱1,500 and below 1% 2%

    Over ₱1,500 2% 2%

    Copy of Proclamation No. 986, s.2020, Declaring the regular holidays and special(non-working)

    days for the year 2021

    The regular holidays are:

    ● January 1, 2021, Friday - New Year's Day

    ● April 1, 2021, Maundy Thursday

    ● April 2, 2021, Good Friday

    ● April 9, 2021, Friday - Araw ng Kagitingan

    ● May 1, 2021, Saturday - Labor Day

    ● June 12, 2021, Saturday - Independence Day

    ● August 30, 2021, last Monday of August - National Heroes' Day

    ● November 30, 2021, Tuesday - Bonifacio Day

    ● December 25, 2021, Saturday - Christmas Day

    ● December 30, 2021, Thursday - Rizal Day


    Special non-working days:

    ● February 12, 2021, Friday - Chinese New Year

    ● February 25, 2021, Thursday - EDSA People Power Revolution Anniversary

    ● April 3, 2021 - Black Saturday

    ● August 21, 2021, Saturday - Ninoy Aquino Day

    ● November 1, 2021, Monday - All Saints' Day

    ● December 8, 2021, Wednesday - Feast of the Immaculate Conception of Mary

    Special working days:

    ● November 2, 2021, Tuesday - All Souls' Day

    ● December 24, 2021, Friday - Christmas Eve

    ● December 31, 2021, Friday - last day of the year

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