When the Men in Black show up at your company’s door to audit your employment records, it’s probably not a good day. But by keeping your records in good order, you can minimize any adverse consequences. Here are some things you should pay attention to on an ongoing basis:
- Fringe Benefits – be sure you’re correctly reporting any taxable fringe benefits on employee Forms W-2 each year. In general, any benefits you provide to employees are subject to income tax withholding and employment taxes. The taxable amount is the difference between what the employee paid and the fair market value (less any allowable exclusions). For an extensive list of fringe benefits that are taxable and those that can be excluded, see IRS Publication 15-B and our earlier article Is That a Taxable Turkey?
- Company Owned Vehicle Usage – if you provide a car to any of your employees, they should be maintaining mileage logs to prove their business use. Otherwise, the IRS can assess the full value of the vehicle on the employee’s W-2. Personal auto use forms and calculations need to be completed before December 31 each year and reported on W-2’s.
- Business Expense Reimbursements – be sure that any business expenses have corresponding receipts, and are for valid business purposes. If employees received cash advances, they should return any excess.
- Form W-4 Withholding – Employees must complete a new Form W-4 each year if they claimed Exempt for the prior year. The employer is required to withhold at Single and 0 exemptions until a new W-4 is received.
This list is intended to be an overview, not everything you need to know. For more details, register for our upcoming Employer Compliance Workshop November 12 or 14 or contact us.