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Tax-Advantage Fringe Benefits are Available for Entrepreneurs

May 29, 2019

Entrepreneurs who seek to start a business have different legal forms of that business entity that can be chosen. These include C corporation, S corporation, partnership, LLC and sole proprietorship. Oftentimes, the determination on which structure to choose is based primarily on how net income from the enterprise will be taxed.

That said, if you are an employee of the organization, the entity you choose may impact the tax consequence to you and the organization regarding the employee fringe benefits that you may want to take. Note the tax consequences of fringe benefits are the same for partnerships, LLCs taxed as partnerships and more than two percent shareholder-employees of S corporations; these are commonly referred to as “flow-through entities.”

Working Condition Fringe Benefits

The following benefits can be given to flow-through entity owners who provide services for the entity:

  • Business-related use of a company auto, if substantiation requirements are met
  • Business use portion of company paid country club dues
  • Job-related education expenses
  • Job placement assistance
  • Cell phone usage

De Minimus Fringe Benefits

  • Supper money/local transportation if provided on an occasional basis in connection with overtime work
  • Traditional birthday/holiday gifts of property (non-cash) with a low fair market value
  • Occasional sporting event or theater tickets
  • Traditional service or retirement awards
  • Cell phone usage
  • Certain levels of passes for public transportation

Other fringe benefits include:

  • Dependent care and educational assistance programs, as long as the total benefits paid to the flow-through entity owners don’t exceed stated percentages of the benefits paid to the workforce as a whole
  • Parking subsidies if certain requirements are met

Do you have questions about tax-advantaged fringe benefits for entrepreneurs, or other tax and financial matters? Please your Smart Entrepreneurial Services Professional at 816-743-7700.

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