Exclusion of Taxable Fringes from 401(k) Compensation

[401 Chaos]

Several references including IRS training materials note that both cash and non-cash fringe benefits are excluded by the fringe benefit exclusion under 1.414(s)-1©(3). The IRS materials specifically note that such benefits include "taxable 'extras' such as the personal use of a company car, educational assistance, etc."

Can anybody point me in the right direction as to where the IRS draws the line with respect to what is a "taxable extra" for such purposes. For example, would a car "allowance" paid under a non-accountable plan be considered a taxable fringe benefit or should that be more properly thought of as general wages. Similarly, what about large cash employee awards or bonuses as opposed to small achievement type awards. I assume the smaller and less frequent the amounts the more likely these are to be thought of as taxable fringes rather than wages but I am trying to determine where the line should be drawn, especially for amounts that are fairly predictable and easily tracked and accounted for.

Thanks for any thoughts or assistance.

[Guest gdburns]

I think that you might have to revise your terminology.

A "taxable extra" generally is anything taxable that is not wages, salary or compensation for services rendered.

A car "allowance" or similar item not under an accountable plan is neither a "taxable fringe benefits" nor wages. It is simply taxable income to be included in gross income.

As for pointing you to something, I suggest that you start with IRS Publications :

Pub 15 Circular E Page 8 et seq

Pub 15-A Possibly page 9

Pub 15-B Employer's Guide to Fringe Benefits

Pu 525 Taxable and Nontaxable Income Pages 3 and 4

[401 Chaos]

Gdburns,

Thanks for your comments. Point taken on the car allowance not being wages or a taxable fringe but the terminology seems to blur a bit, even in the IRS Pubs. For example, Pub 15 (p. 10) notes that "payments to your employee for travel and other ncessary expenses to your business under a nonaccountable plan are wages . . ." I can certainly see where a general car allowance not tied to expenses might fall outside of the "wages" classification but what about one where the amounts really are intended to help cover significant travel costs incurred by the employee. Also, would there be no car allowance arrangement under a nonaccountable plan that could arguably be classified as a taxable extra or taxable fringe.

At any rate, I previously reviewed the various IRS publications and did not find a very good direct discussion of the concept of taxable fringes or taxable extras. Can you provide some additional examples of common items that you would put in this category? (I'm trying to think broadly in terms of what qualifies as a taxable extra as others before me took an extremely broad view.) Many thanks.