What are Perks?
Here is a question that I wonder all of the time.
What is considered a perk?
What can be a perk?
For example, if I want to offer that our company will pick up $25 a month of our best employee's cell phone bill, can we do that?
Going to an extreme, if I want to at some later point pick up the car payment for or something for the employee of the month, can we do that even if we don't own the car and the employee still does?
Is that a perk? Is it a tax write off for us, or is that taxable income for us or for the employee?
Perks definately are not what they used to be. Companies used to offer "perks" in lieu of salary but the IRS cracked down.
Technically, the above perks that you posted should be added to the employee's W-2 as compensation. You might and probably can get away with a small bill, like the phone but it really isn't to anyone's benefit because it's deductable for the employee.
To get around the car perk, you could lease a car under the companies name and let your employee drive it for a month.
In order to have an expense for the company, it must be in the company's name otherwise, it's income for the employee.
If you want to give a perk to employee's, look into medical insurance payments.
Thank you!
Hi Bernadette,
Hmmm.... okay, so let me ask you this. How do I lease a car for a month?
Even better, can my company (that I own) lease my own car so that I can somehow write off the payments instead of the mileage?
Also can I then make that lease retroactive for 2001 and 2000 since I have owned the cars for those years too?
Narayan
Re: Thank you!
You can't lease a car for a month. I believe that the leases run somewhere around three years. You would have to lease a car for the company (called a company car) and let someone drive it. It's like salesmen driving a company car.
Yes, you could lease your car through your company but not your personal car. It has to come through a leasing company. You can lease a car through a leasing company for you to drive.
No, this can't be retroactive. The expense starts when the lease starts.
Here's another thought. You could sell your personal car to the company. The company would take over the payments, taxes and license fees. Also the upkeep but you better discuss this with your car lender first. They may not want to transfer the loan to the company. They may ask that the balance be paid in full or for you to apply for another loan under the company name.
What kind of status does your company have? Are you a corporation, a sub-chapter S corporation, a partnership or a sole proprietership?
We're an S Corporation. My company is New Frontiers International. www.nfiweb.com.
If I sell my car to my company, assuming my bank is okay with that per your notes, then who picks up the tab for the insurance and who has the liability?
Re: S Corp
I think we're on the same page here, but I need to clarify that I am making payments on my personal car (I'm purchasing it), and not leasing it.
Also do I sell the car to the company at my current payoff on the loan or at the (higher) retail value?
Man, you realllllllly need to hire yourself an accountant.
As to cars, they have more regulations than anybody but the Beckster can remember but
1) I don't see how you can get a capital gain by selling a personal car at less than you paid for it unless you've been depreciating it with business use. (If you overpay yourself for it, that would probably just be reclassed from the asset to a distribution, although if it was blatant there could be penalties)
2) All this mileage tracking is absolutely & specifically required. You should also set up a Qualified Plan for reimbursement of all employee expenses & save everybody trouble.
3) If you have a business lease a car & an owner, family member, or 2% shareholder uses it, you can be stuck with W2 inclusion of a benefit amount even if it's used only for business
4) Remember that commuting is not travel, the 6000 pound rule, & the difference between the exceptions to the depreciation limits & the listed property rules & you should understand that...
Narayan: You need an Accountant!
(& yes Bernadette, I never took a tax course, but in 15 years (tax examiner & CPA) I've picked up a little)
(At least you're not spamming for your board here: Narayan's board
It was the old days
They were about to install the course requirements so I had to pass the exam before they could lock me out. You'll find that there are a lot of CPAs who started out in liberal arts or sciences and finally just settled in to make a living later - they tend to do fine.
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