Competition is fierce when it comes to attracting and retaining the top talent for your dental practice and it seems as though dental professionals have no choice by to get creative when it comes to providing their dental staff with a comprehensive benefit package. We’ve seen other companies successfully deploy the tactic of providing their teams with fringe benefits, especially those businesses within the technology sector; and maybe it’s time for practice owners throughout the dental industry to consider this approach.
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Have you been considering new ways to increase the quality and quantity of your practice’s talent pool? Fringe benefits like free food, massages, fitness centers and game rooms not only help your practice stand out among other practices in the area, they can be implemented without increasing your tax liability. The following is an overview of Publication 15-B, the Employer’s Tax Guide to Fringe Benefits, which is a helpful tool for owners of dental practices who are looking to learn more about the treatment various kinds of fringe benefits will receive at tax time.
What Is A Fringe Benefit?
Generally speaking, a fringe benefit is a form of payment given to a person in exchange for the performance of services. This benefit can be provided by you (the practice owner) to any person (not necessarily a member of your staff) who is performing services for your office, which means independent contractors and partners, for example, are also eligible to receive fringe benefits.
Are Fringe Benefits Taxable?
All fringe benefits provided by your business are taxable and must be included in your recipients pay unless the law specifically excludes it. Further guidance on how to determine the taxable inclusion amounts is found in Publication 15-B. That being said, cash, cash equivalents and gift cards are generally considered taxable and are not included on the exclusion list below.
What Types Of Fringe Benefits Are Specifically Excluded And Non-Taxable?
(This is not an extensive list.)
- Achievement Awards – Your staff likes being recognized for their length of service or safety achievements. While recognition/awards that take the form cash, cash equivalents and gift certificates are taxable, practice owners can reward the dental practice’s team with tangible personal property under this exclusion. Note: Depending on the type of the award, dollar limits may apply.
- Athletic Facilities – If you maintain an on-site athletic facility that is exclusively used by your office’s staff, your staff’s spouses and their dependent children, the value of this benefit is not required to be included in your staff’s wages.
- De Minimis Fringe Benefits – A de Minimis fringe benefits are “perks” that are considered to have very little value – so much so that accounting for a benefit of this size would be considered unreasonable or administratively impractical. Common examples of de Minimis fringe benefits include:
- Occasional personal use of company copying machine
- Holiday gifts, with a low market value
- Occasional tickets to the theater or a sporting event
- Occasional parties and picnics for your practice’s staff and their guests
- Employee Discounts – This fringe benefit, while subject to limitations, implies that an employer can offer employees a discount for property or services, as long as it is provided to patients as well.
- Employer-Provided Cell Phones – Many dental professionals provide cell phones for non-compensatory business reasons. Personal use of an employer provided cell phone is excludable from an staff member’s income.
- De Minimis meals – Coffee, donuts, soft drinks and meals that help to enable your staff to work for longer periods of time are not taxable. Just remember to know your audience – too much sugar is bad for the teeth!
- Meals on your business premises – Meals that are provided to you team on your practice’s property, which are made available for convenience (facts and circumstances), are excludable.
NOTE: Expect to see more IRS guidance forthcoming regarding meals as they fine tune the “employer’s convenience” guidance. With all the attention Google and Facebook have garnered for their employee meals the IRS has made meal fringe benefits a priority initiative.
Email a Bright Dental CPA to learn more about what tactics are available to help you attract the talent you need while helping you keep your tax bill down.
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