It’s tax time again, and this year is anything but routine
April is the cruelest month for a reason—it’s crunch time for employees’ 2018 income taxes. The 2018 1040 has changed so substantially (not really for the better in our opinion) and figuring your taxes is so different that employees may be feeling more stress than usual.
According to a recent survey by Robert Half U.S., employers are providing tax assistance to employees, ranging from the benign (like turning a blind eye when they use the photocopier) to more proactive (like providing in-person help to employees).
That’s great, but you have to be careful that your assistance doesn’t cross the line into a taxable fringe benefit.
According to the survey, nearly half of employees use their employers’ resources to complete their tax paperwork. This includes using photocopy machines, scanners and mailroom facilities.
All of these items qualify as quintessential de minimis fringe benefits—a property or service you provide to employees that has so little value that accounting for them would be unreasonable or administratively impracticable.
You could go as far as setting up a computer in an empty office that employees can use to upload their taxes themselves or use the IRS’ free e-file program. However, you need to keep computer security in mind. To avoid a pile up at this computer, think about using a sign-up sheet.
What’s not tax-free
The survey also reported that nearly a third of employers—31%—are providing employees with discounts on financial software and services or on-site tax preparers. That’s a substantial percentage. The value of most of these items and services will be taxable to employees. There are two narrow exceptions:
- Discounts on merchandise, like financial or tax software, are tax-free to employees if the merchandise is offered for sale to the employer’s customers, the discount doesn’t exceed the employer’s gross profit percentage multiplied by the sale price to customers and certain nondiscrimination rules are met. Bottom line: Unless you’re selling financial or tax software to the public, the full fair market value (not what you paid for it) is includible in employees’ incomes.
- As with the discount on merchandise, discounts on services are tax-free to employees only if you’re offering financial or tax prep services to the public. The discount on services is limited to 20% of the sale price to customers. The same nondiscrimination rules apply.
- If you’re bringing in tax pros, the value of their services is includible in employees’ incomes.
Procrastinators never prosper
It’s a good idea to have a stack of Form 4868, Application for Automatic Extension of Time to File U.S. Individual Income Tax Return.
Employees can apply for a six-month filing extension, but they must still pay what they owe by April 15.
Tax time from years ago
The IRS has announced that unclaimed income tax refunds totaling almost $1.4 billion may be waiting for an estimated 1.2 million taxpayers who didn’t file 1040s for 2015.
To collect their refunds, taxpayers must file their 2015 1040s by April 15, except for taxpayers in Maine and Massachusetts, who have until April 17. Here’s the hitch: You have to file returns for 216 and 2017 in order to get your 2015 refund. And the IRS will apply the refund to amounts still owed to it or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.
Old tax forms are available at the IRS’ website.