This starts with a pretty basic question related to employers deducting their employee fringe benefits. For simplicity, let's say it's a sole proprietor who has employees, filling out his Sch. C.
Let's say he has a cafeteria plan for his employees, including health insurance and dependent care benefits. The employees have the choice of bypassing either benefit and taking their full salary.
1) Employee Joe has a $50,000 salary, and doesn't choose any benefits. His whole $50k shows up as wage income on W-2 (as well as SS wages, etc).
2) Employee Sally has a $50,000 salary, but chooses $10,000 in health insurance benefits. Only $40,000 is her wage income on W-2 (as well as SS wages, etc).
Employer deducts $90,000 wage expense on Line 26 of Sch C, and $10000 on Line 14 as employee benefit expense? I suppose it would be WRONG to instead just deduct the whole $100k as wage expense?
NOW what about deducting qualified public transportation expense? EVEN IF the amount is deducted from the employee's paycheck as part of a salary reduction agreement--making it non-taxable to the employee--it is no longer deductible by the employer it seems. BEFORE of course it was a deductible benefit. But it seems (given pub 15-B p 20-21) that EVEN as part of a salary reduction plan (similar to a cafeteria plan, but with much less stringent requirements), the EMPLOYER is almost worse off because they can't deduct it like they COULD HAVE the whole wage (though there's some offset perhaps--or is there?--Is it subject to SS/medicare?)
I just want to make sure I'm understanding this correctly.
Answers for even the first basic question greatly appreciated!!
Also, did I hear something about New York State not allowing the non-taxable status even to the employee??...
Thanks!!!
Let's say he has a cafeteria plan for his employees, including health insurance and dependent care benefits. The employees have the choice of bypassing either benefit and taking their full salary.
1) Employee Joe has a $50,000 salary, and doesn't choose any benefits. His whole $50k shows up as wage income on W-2 (as well as SS wages, etc).
2) Employee Sally has a $50,000 salary, but chooses $10,000 in health insurance benefits. Only $40,000 is her wage income on W-2 (as well as SS wages, etc).
Employer deducts $90,000 wage expense on Line 26 of Sch C, and $10000 on Line 14 as employee benefit expense? I suppose it would be WRONG to instead just deduct the whole $100k as wage expense?
NOW what about deducting qualified public transportation expense? EVEN IF the amount is deducted from the employee's paycheck as part of a salary reduction agreement--making it non-taxable to the employee--it is no longer deductible by the employer it seems. BEFORE of course it was a deductible benefit. But it seems (given pub 15-B p 20-21) that EVEN as part of a salary reduction plan (similar to a cafeteria plan, but with much less stringent requirements), the EMPLOYER is almost worse off because they can't deduct it like they COULD HAVE the whole wage (though there's some offset perhaps--or is there?--Is it subject to SS/medicare?)
I just want to make sure I'm understanding this correctly.
Answers for even the first basic question greatly appreciated!!
Also, did I hear something about New York State not allowing the non-taxable status even to the employee??...
Thanks!!!
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