What You Need to Know About Imputed Income and Fringe Benefits
When an employee receives non-cash compensation that is considered taxable, the value of that benefit becomes imputed income to the employee. Imputed income is added to the employee’s gross (taxable) income, but is not included in the net pay because the employee has already received the benefit in some other form.
A fringe benefit is a form of pay for the performance of services. For example, you provide an employee with a fringe benefit when you allow the employee to use a business vehicle to commute to and from work. The IRS has provided us with an “Employer’s Tax guide to Fringe Benefits” to use in 2010 as an overview of all benefits, exclusion rules, valuation rules, withholding, depositing or reporting.