On December 3, 2020, the IRS provided an early release draft of the 2021 IRS Publication 15-B, the Employer’s Tax Guide to Fringe Benefits . This publication provides an overview of the taxation of fringe benefits and applicable exclusion, valuation, withholding and reporting rules.
As background, the IRS modifies Publication 15-B each year to reflect any recent legislative and regulatory developments. Additionally, the revised version provides the applicable dollar limits for various benefits for the upcoming year. As standard procedure, the IRS releases a preliminary draft of the updated guide prior to final publication.
Among the changes for 2021 is a new Form 1099-NEC. The Form 1099-NEC will be used to report nonemployee compensation paid in 2020 and will be due on February 1, 2021.
With respect to 2021 annual limits, the monthly exclusion for qualified parking is $270 and the monthly exclusion for commuter highway vehicle transportation and transit passes is $270 (both unchanged from 2020). For plan years beginning in 2021, the maximum salary reduction permitted for a health FSA under a cafeteria plan remains $2,750. Further, if the health FSA permits a carryover, the maximum carryover amount for plan years beginning in 2021 is $550.
Employers should be aware of the changes reflected in the early release of the fringe benefits guide. The IRS is accepting comments regarding the proposed publication. Accordingly, employers should also recognize that some changes to the released draft may occur prior to finalization, and draft forms should not be used for filing.
Draft Publication 15-B »
PPI Benefit Solutions does not provide legal or tax advice. Compliance, regulatory and related content is for general informational purposes and is not guaranteed to be accurate or complete. You should consult an attorney or tax professional regarding the application or potential implications of laws, regulations or policies to your specific circumstances.
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