Frequently Asked Question
Add fringe benefit income for appropriate employees FAQS
1. What are fringe benefits?
Fringe benefits are employer contributions to certain insurances and include the following:
- SURS Retirement Contributions
- Health Insurance
- Dental Insurance
- State Life Insurance
- Medicare
- FICA
The actual cost of fringe benefits differs for each employee based on the choices chosen or the kind of employment. The State of Illinois does not cover fringe benefits cost for employees whose salary is fully paid by a grant. Therefore, the grant must fund the fringe benefits.
2. Who offers and who receives fringe benefits?
It is important to understand who offers a fringe benefit because the provider of a fringe benefit is responsible for reporting the value to the IRS. This contains applying all applicable employment taxes for employees to Form W-2 and reporting the benefit on Form 1099-MISC for independent contractors and Schedule K-1 (Form 1065) for partners. Failure to report fringe benefits to the IRS may result in additional taxes and consequences.
3. What are Taxable fringe benefits?
Although there are exceptions, most fringe benefits are taxable. Fringe benefits can be in the form of services, property, and cash or cash equivalent. The most common taxable fringe benefits include awards and prizes, bonuses and commissions, and the personal use of a company car. It is important to remember that all fringe benefits, unless exactly excluded by the IRS, are taxable.
