900 Taxable Fringe Benefits
Payroll Policy and Procedure Manual
Section 900: Taxable Fringe Benefits
Some benefits provided to OSU employees are taxable. Taxable fringe benefits include, but are not limited to:
- Tuition reduction (the difference between full tuition and the staff rate)
- Personal use of state vehicle
- Moving Expenses
- Taxes on these benefits are processed by one of the following methods:
The benefit is paid through payroll system as taxable income. Associated Other Payroll Expenses (OPE) will be charged to the pay index.
The benefit is paid directly to a vendor or the employee by Accounts Payable, or the benefit is provided to the employee at a reduced rate or no cost. The value of the benefit is then processed as a non-cash earning for the employee. This process reduces the employee's net pay by the amount of the withholding tax relative to the benefit amount. Associated OPE will be charged to the pay index.
Awards given to OSU employees by OSU, or by any entity that is not considered to be an "arms-length" entity, are taxable to the employee. These amounts are subject to income tax, Social Security and Medicare withholding. These awards should be processed through the payroll program using an FAC earn code and the following account codes:
- 10207 - Academic Employee Awards
- 10417 - Classified Employee Awards
- 10507 - Student Awards
If a department needs a check for presentation to an employee, they should contact the Payroll Manager at least one week prior to the event.
For additional information regarding taxable awards, refer to Giving an Employee a Cash Award on the Payroll Office website.
When educational assistance exceeds $5250.00 per calendar year, the benefit is subject to income tax, Social Security, and Medicare withholding. These benefit amounts are provided to the Payroll Office by Student Accounting and are processed by the Payroll Office using Method 2 (see PAY 901-02: Method 2 in this manual). For additional information about tuition reduction refer to the Benefits Office website.
Personal use of state vehicles is a taxable benefit and is subject to income tax, Social Security, and Medicare withholding. There are three methods of computing the value of personal use of a state vehicle:
- Cents per mile charge
- Percentage of lease value
- Commuting method
These benefits must be submitted to the Payroll Office by the department on appropriate forms. The Payroll Office will process the benefits using Method 2 (see 901-02: Method 2 in this manual).
904-01 Commuting Method
If all of the following requirements are met, no log of miles driven will be required. Accounting and tax requirements will be satisfied by the addition of $3 per day, net of any reimbursements, to the employee's income:
- The vehicle must be used for University business by one or more employees.
- The University must require the employee to commute in the vehicle for bona fide business reasons.
- The value of the commuting use must be included in the employee's income.
- The University must specifically prohibit personal use of the vehicle by the employee other than de minimus personal use.
- The employee must not be a "control employee". That is, the employee cannot be an elected official.
- University management must reasonably believe that the above requirements are being met.
The following procedures are to be followed in order to control and account for the commuting use of University-provided vehicles:
- Each quarter, Central Payroll will be informed of the number of commuting days in the quarter and will add $3 per commuting day, net of any reimbursement, to the employee's gross income. FICA taxes will be withheld on the additional income. No Federal or State Income Taxes will be withheld.
- A Special Accounting Period provided in the Internal Revenue Code will be used. The rule allows an employer to report the additional income for November and December in the next calendar year. Therefore, the reporting quarters will end on the months of January, April, July and October.
All moving expenses are submitted to Business Affairs who will notify Central Payroll of any payments that need to be made through the Payroll Office (see PAY 901-01: Method 1 in this manual), and any payments paid by Accounts Payable that are taxable (see PAY 901-02: Method 2 in this manual). The Payroll Office will process these using the appropriate method. This benefit is taxable and subject to income tax, Social Security, and Medicare withholding.