Fringe Benefits

Fringe benefits are non-wage compensation elements provided to employees in addition to base salary — including health insurance, retirement contributions, life insurance, disability coverage, paid leave, education assistance, employee discounts, and similar employer-funded value. From a tax perspective, most fringe benefits are either fully exempt from income tax (health insurance premiums, qualified retirement plan contributions) or subject to specific IRS valuation rules that determine the taxable value the employee must report. The employer's responsibility is correctly valuing and reporting taxable fringe benefits on W-2s — failure to report taxable benefits exposes both the employer to penalty for incorrect W-2 reporting and the employee to back tax liability when discovered in audit.