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Payroll Today

The best year-end payroll tip ever

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Alice Gilman

by on
in Payroll Today

It’s October, the time when year-end anxiety begins to creep in. And this year, there’s more to worry about—your paper and electronic W-2s are due to the Social Security Administration on the same day they’re due to employees. No more extra time to hunt for and correct errors.

Using the IRS’ special accounting rule for valuing noncash fringe benefits, however, can lighten your year-end load considerably.

How it works

Valuing taxable noncash fringes—employees’ personal use of company cars, company computers or similar items—is a hassle that takes time away from your other year-end duties.

Relief: Under the special accounting rule, you can treat the value of taxable noncash fringes actually provided to employees during November or December, or any shorter period within those last two months, as paid in 2017.

Upshot: If this is the first year you’re using the special accounting rule, employees will be taxed on only 10 months’ worth of fringes. Next year, you revert to taxing on a 12-month basis—fringes provided in November and December 2016, as well as fringes provided in January through October 2017, with the November and December fringes again rolling over into 2018.

Even better: You don’t have to notify the IRS that you’re using the special accounting rule or that you’re changing the period for which you use the rule.

Limitations

There are several strings that go along with the special accounting rule:

  • You can’t use it if the fringe is a transfer of tangible or intangible personal property that’s normally held for investment, or a transfer of real property.
  • You can use the special accounting rule for some noncash fringes, but not for others, and the period doesn’t have to be the same for each fringe. But if you use the rule for a particular fringe, you must use it for all employees who receive that fringe.
  • Your employees must also use the special accounting rule for the same period that you use it and they can’t use it unless you do.
  • You must notify employees of the period during which you used the special accounting rule at or near the date you give them their W-2s, but not earlier than their last paychecks of the year.

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