Tax-free employee benefits

One of the primary goals of small business employee benefit plans is to provide tax-free compensation to employees.

Employer-provided employee benefits are generally taxable in the same way as regular wages. There are exceptions, however, that allow tax-free treatment. Freedom Benefits focuses on allowing employers to maximize those nontaxable benefits that are selected by individual employees. The savings can add up to thousands of dollars in tax savings to both the employer and each individual employee.

Nontaxable benefits include:

Accident and health benefits.
Achievement awards.
Adoption assistance.
Athletic facilities.
De minimis (minimal) benefits.
Dependent care assistance.
Educational assistance.
Employee discounts.
Employee stock options.
Employer-provided cell phones.
Group-term life insurance coverage.
Health savings accounts (HSAs).
Lodging on your business premises.
Meals.
No-additional-cost services.
Retirement planning services.
Transportation (commuting) benefits.
Tuition reduction.
Working condition benefits

Employers  must meet other additional administrative requirements to keep each of these listed benefits free of federal income taxes1 to employees. That’s where Freedom Benefits come in. These benefits are tax-deductible by the employer and not taxable to the employee when provided under a Freedom Benefits small business employee benefit plan.

Employee contributions

Employees typically elect to receive compensation in the form of tax-free benefits instead of cash compensation,

Employer contributions

We generally recommend that employers allocate a minimum of 2% of total payroll of eligible employees to this type of employee benefit plan. When this funding requirement is met, the employer meets the requirements for non-discriminatory benefits. when this amount is allocated to benefits provided by us then no additional fees are charged by Freedom Benefits 2.

Ask for a proposal on the tax savings that can be offered to your firm’s employees.

 


1 In some cases the taxation under state laws varies from the federal tax treatment. Freedom Benefits does not provide tax advice except when included as part of a separate payroll services agreement or other tax services agreement.
2 Freedom Benefits charges a $300 initial consultation and proposal fee that is applied to the amount of available employer-paid benefits if the plan is started with the proposed amount of employer funding.

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