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More employers offer financial counseling, tax preparation and retirement planning as employee benefits

A financially secure employee is a productive one. Employee benefits play a key role in attracting and retaining employees. Financial counseling, tax preparation and retirement planning services are increasingly popular benefits offered by employers to their employees. However, not all of these result in a tax-free perk to employees. If you are considering offering your employees financial, tax or retirement planning services, you need to understand the tax consequences to both you and your workforce.

Financial counseling and tax preparation services
Generally, the fair market value of fringe benefits is included in the recipient's gross income unless specifically excluded. There are no specific exceptions under the Internal Revenue Code that exclude financial counseling and tax preparation services from tax. However, some financial counseling and tax preparation services, depending on what type of service is offered and how frequently the service is offered, might be excluded from employees' gross incomes. The IRS has ruled that employer sponsorship of a Volunteer Income Tax Assistance site is a de minimis fringe benefit as is formatting and transmitting employees' returns to qualify for the IRS's e-File program. However, employer-provided vouchers for income tax preparation services are not a de minimis fringe benefit. The IRS's guidance in this area is complicated. We'll help you navigate the complex rules.

Retirement planning services
If you maintain a qualified retirement plan, qualified employer-provided retirement planning services are not taxable as income to your employees. The Economic Growth and Tax Relief Reconciliation Act of 2001 added employer-provided qualified retirement planning services as a new type of fringe benefit that is specifically excluded by law from employees' taxable income. The cost of these services is deductible by the employer as a business expense. For purposes of the fringe benefit, a qualified employer plan may be, but is not limited to, a pension, profit-sharing and stock bonus plans, certain annuity plans and annuity contracts, federal and state government employee plans, and certain simplified employee pensions and SIMPLE retirement accounts.

The Internal Revenue Code broadly defines "qualified retirement planning services" as "any retirement planning advice or information provided to an employee and his spouse by an employer maintaining a qualified employer plan." However, Congress specifically excluded certain services related to retirement planning, which are tax preparation, accounting, legal, and brokerage services.

If you would like more information about providing retirement, financial or tax planning services as a benefit to your employees, please call our office. We would be happy to help you design a program tailored to your employees.

If and only to the extent that this publication contains contributions from tax professionals who are subject to the rules of professional conduct set forth in Circular 230, as promulgated by the United States Department of the Treasury, the publisher, on behalf of those contributors, hereby states that any U.S. federal tax advice that is contained in such contributions was not intended or written to be used by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer by the Internal Revenue Service, and it cannot be used by any taxpayer for such purpose.