Corporate HR departments love nontraditional benefits—perks other than leave, health insurance and retirement benefits—because they’re generally cheap and build loads of employee good will. However, many so-called lifestyle benefits are taxable, much to HR’s chagrin.
Employers that use their corporate buying power to provide employees with discounts on pet insurance, auto insurance, special shopping events at department stores, coupons, etc., generally don’t haveproblems, since employees pay with after-tax dollars. Wrinkle: The more creative the benefit, the more likely it is that will be due. Consider the following.
• Cash rewards. Cash trumps coupons or discounts every time. But cash is always taxable, because it has value. Watch out: Cash can be disguised. An employer-based rewards program that tracks employees’ purchases and gives them cash credits is still cash.
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