The Northstar News - May 2004

Recap of May 20^th Monthly Meeting

Chapter President Sharlene Smith CPP started the meeting at 8 AM.  Her usual opening quotes reflect the designated educational topic for the day, and she noted that there wasn’t any memorable material related to the rather dry concept of taxable fringe benefits!  So instead she recited a pleasant quote she found of a general nature:

She mentioned several general chapter business items.  The CPE certificates for the April meeting that weren’t available then were up at the registration desk if attendees didn’t already get one.  She reminded everyone that the chapter scholarship award deadline is May 31^st and that all details are available on our website.

Also, our chapter representative on the national APA Board of Directors is looking for any ideas or suggestions from our group on ways the national organization can serve the chapters better.  The chapter representative is interested in all ideas, and none is too large or too small.  Sharlene requested that any suggestions be added to the bottom of the evaluation sheets.  She also noted that the chapter representatives are once again promoting National Payroll Week (NPW) which we celebrate September 6-10 this year. They’re asking all members to be sure and promote the “Getting Paid in America” survey at www.nationalpayrollweek.com with all of our employees.  Those who complete the survey are automatically entered in a contest, and the lucky winner will receive a free trip to Las Vegas and a free paycheck!

Sharlene turned over the microphone to Patrick White CPP, chapter Communications Director, who continued talking on the NPW theme.  He noted that a freelance reporter for the Star Tribune newspaper’s employment column was planning an article to be published in late August on payroll debit cards.  The reporter is looking to interview members who may be currently using or contemplating the use of these pay cards in their organizations.  Patrick noted that anyone quoted would have his or her name, title, and chapter affiliation mentioned along with the upcoming NPW tie-in; and this would be a great way to increase our organization’s visibility.

Patrick then discussed another NPW opportunity we have for increasing our profile as a chapter and as a profession, as well as satisfy another chapter goal of community outreach.  He noted that Robin Murphy CPP has been in contact with The Muscular Dystrophy Association regarding their telethon, and we have the opportunity to offer 20 or more volunteers to take pledges during a 2-2 ½ hour time slot.  We would provide chapter-identified NPW T-Shirts for all helpers and we’d be permitted to hang our banner above the televised phone bank.  Patrick noted that a sign-up sheet was in the back of the room and encouraged anyone who can commit to the effort to please provide their name and contact information.

Vice President Karen Kline then spoke about another upcoming chapter activity and associated volunteer opportunity—our annual conference.  She mentioned that the chapter is looking for help in numerous conference planning areas.  Opportunities are available in coordinating the vendor scavenger hunt, luncheon centerpieces, ordering and assembling hand-out materials, contacting and introducing speakers, and creating session evaluation forms.  The conference committee is also looking for lunch table discussion topic leaders.  She indicated that sign-up sheets were posted in the back of the room for this effort, and encouraged everyone to participate in some way.  She noted that our ultimate goal was to have so many volunteers involved that we may have to turn a few away.

Karen then turned the meeting over to Program Chair Barb Muellerleile CPP, who mentioned that she was looking for an assistant to help with upcoming program planning.  Tasks involved would include contacting potential meeting speakers and organizing their presentation equipment needs.   She asked that any individuals interested in this role to contact her.

Barb then introduced the speakers for today’s session, Allan Gregerson and Carole Smith, Senior Tax Specialists with the Internal Revenue Service (IRS).  Click here for a Powerpoint version of their presentation on Fringe Benefits.  Additional comments made by the speakers and attendees are noted here, along with references to the associated Powerpoint slide.

Before discussing the main topic, Ms. Smith mentioned a few initiatives the IRS is currently focusing on with regards to employment tax non-compliance (see slide 3).  They are actively investigating employers in all of the areas mentioned.  “Pyramiding” is the employer practice of collecting withholding taxes but failing to remit them to the government.  “Unreliable Third Party Payers” refers to certain payroll service bureaus.  “Frivolous Arguments” refers to certain employers who believe that Internal Revenue Code section 861 permits them to avoid withholding taxes altogether.  “Misclassifying Worker Status” means that an employer considers workers independent contractors when in reality they are employees.  She noted that paying employees in cash is completely legal if the employer first withholds taxes.

Ms. Smith also discussed the IRS’ EFTPS tax deposit penalty refund program, and their Tip Reporting Alternative Commitment (TRAC) program (slides 5 & 6).  She noted that the latter has been a very successful joint effort between the restaurant industry and the government. 

Employer Fringe Benefits discussion—Ms. Smith and Mr. Gregerson took turns covering the main topic:

Slide 10 – FMV = Fair Market Value

Slide 11—Meals and lodging provided to employees is not taxable if provided for the convenience of the employer.  The dollar limit on educational assistance is $5,250.  Tax-free group insurance is limited to the first $50,000 in coverage.

Slide 15 – Accountable plans are related to employee Travel (defined as being away from home overnight by necessity due to the distance involved) and Transportation (defined as local movement of an employee for business purposes).  Mr. Gregorson noted that if the employer does not have an accountable plan, the employee can still deduct eligible business expenses on their personal return, but only those amounts over the 2% AGI floor, and only if it is deductible under the Alternative Minimum Tax rules.  These two caveats can make the personal deduction of employee business expenses much less valuable than if they were not included in income in the first place via the availability of the employer’s Accountable Plan.

Slide 19 – An attendee asked Mr. Gregorson what was considered a reasonable amount of time for the return of any excess amounts given to an employee not used for business purposes.  He replied that it was 120 days.

Slide 20 – All amounts given or reimbursed under a Non-accountable plan must be included in the employee’s taxable income.

Slide 26 – For travel expenses to be valid it must be impractical for the employee to return home by the end of the day due to the distance involved (i.e. a stay at a local hotel is not a valid travel expense).

Slide 29 – “Office” here refers to the employee’s regular place of business.  Commuting expenses between the home and “office” are not deductible/excludable from income (also see slide 33).

Slide 30 – In response to a question from an attendee, Mr. Gregorson noted that reimbursements for parking meter fees that don’t provide a receipt would still be deductible/income excludable if they appear reasonable in amount.

Slide 32 – Mr. Gregorson noted that work sites could only be designated as temporary if the time duration spent there is a year or less, and that this is often an issue in the construction industry.

Slide 35 – IRC section 217 refers to the time, distance, and business related tests applied to moving expenses that permit their deductibility (or exclusion from income if reimbursed), as well as the types of moving expenses permitted such treatment.  The speakers did not cover these tests or expenses in detail.

Slide 41 – Work clothes/clothing allowances may be provided tax-free only if the clothing involved has the employee’s or company’s name/logo on them, they would not ordinarily be worn outside of the workplace, and reimbursed under the accountable plan rules covered above.  In response to an audience question, Mr. Gregorson noted that if a firm pays for a cell phone used for both personal and business use, the value of the personal use is taxable if not repaid by the employee.  Likewise, a cell phone allowance paid to an employee who uses their own phone would be taxable if there is no accounting for the proportion used for business.

Slide 44 – The current Federal mileage rate is 37 ½ cents per mile.

Slide 48 – Ms. Smith noted that the use of online driving distance calculation programs, such as Mapquest, was fine for tracking business mileage.  Actual odometer readings are not mandatory. 

Slide 49 – Note that one must know the percentage of business/personal use of the car before any of the permitted valuation methods are used.

Slide 51 – The lease value tables are published in IRS publication 15B.  The Lease-Valuation rule must stay in place for at least four years if the vehicle stays with the same employee.  The employer-provided fuel rate, if applicable, must be added on top of the lease value rate.

Slide 52 – The value listed on the slide is an error.  It should be $14,800.

Slide 54 – The commuter valuation rule rate applies in full to each person if more than one employee uses the vehicle at the same time.  The employer must have a written plan in place if using this method.  The employer must require that the employee use the company vehicle between work and home.  Also, the vehicle cannot be used for personal use other than the commute and short stops en route to/from home and work.

Slide 62 – Restaurant gift certificates are considered non-restricted (taxable) unless they state on the face that they are to be used for a specific menu item only.  Department store or other general retailer gift certificates that do not specify the exact merchandise item they may be redeemed for are also considered non-restricted.

Slide 64 – Along with a holiday ham or turkey, a gift certificate redeemable for such an item would also be considered De Minimus (non-taxable).

At the conclusion of the presentation, Barb reminded attendees to complete the evaluation forms and to sign up for the volunteer positions posted, and the meeting was adjourned.