Cellular Phone And Internet Services
If you provide your employee with a cell phone that you own, to help carry out their employment duties, the fair market value of the cell phone or device is not a taxable benefit.
However, if you reimburse your employee for the cost of their own cell phone , the FMV of the cell phone or device is considered a taxable benefit to the employee. This is the case even if the employee used, lost, or damaged the cell phone or device while carrying out their employment duties.
If you pay for, or reimburse the cost of an employees cell phone service plan, or Internet service at home to help carry out their employment duties, the portion used for employment purposes is not a taxable benefit.
If part of the use of the cell phone or Internet service is personal, you have to include the value of the personal use in your employee’s income as a taxable benefit. The value of the benefit is based on the FMV of the service, minus any amounts your employee reimburses you. You can only use your cost to calculate the value of the benefit if it reflects the FMV.
For cellular phone service only, we do not consider your employee’s personal use of the cellular phone service to be a taxable benefit if all of the following apply:
- the plan’s cost is reasonable
- the plan is a basic plan with a fixed cost
- your employee’s personal use of the service does not result in charges that are more than the basic plan cost
Note
Qualifying For Cobra Health Insurance
There are different sets of criteria for different employees and other individuals who may be eligible for COBRA coverage. In addition to meeting these criteria, eligible employees can typically only receive COBRA coverage following particular qualifying events, as discussed below.
Employers with 20 or more full-time-equivalent employees are usually mandated to offer COBRA coverage. The working hours of part-time employees can be clubbed together to create a full-time-equivalent employee, which decides the overall COBRA applicability for the employer. COBRA applies to plans offered by private-sector employers and those sponsored by the majority of local and state governments. Federal employees are covered by a law similar to COBRA.
Additionally, many states have local laws similar to COBRA. These typically apply to health insurers of employers having fewer than 20 employees and can be called mini-COBRA plans.
A COBRA-eligible employee must be enrolled in a company-sponsored group health insurance plan on the day before the qualifying event occurs. The insurance plan must be effective on more than 50% of the employer’s typical business days in the previous calendar year.
The employer must continue to offer its existing employees a health plan for the departing employee to qualify for COBRA. In case of the employer going out of business or the employer no longer offering insurance to existing employees , the departing employee may no longer be eligible for COBRA coverage.
Employee Coverage Effective Dates
The ACA requires individuals to have health care coverage that meets the ACAs minimum value and affordability requirements. This requirement must be met for each month of the year or the employer will face a tax penalty.
Health care coverage for employees of applicable large employers, known as ALEs, must meet these requirements:
- Affordability: An employees cost of coverage must not exceed a maximum percentage of their total household income .
- Coverage percentage: The employer must provide insurance to a specified percentage of full-time employees to avoid a tax penalty.
- Minimum value: The health plan must cover a certain amount of the cost of health care.
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What Is Form 1099
Form 1099-H, Health Coverage Tax Credit Advance Payments, is one of a series of Internal Revenue Service 1099 forms used to report various non-employee payments and transactions. Form 1099-H is used to report advance payments of qualified health insurance payments for the benefit of eligible trade adjustment assistance , alternative TAA , reemployment TAA , or Pension Benefit Guaranty Corporation payees and their qualifying family members.
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How Is The Amount Of Qualified Health Plan Expenses That Is Treated As Qualified Wages Determined
Generally, the qualified health plan expense is the amount that is allocable to the hours for which the employees receive other qualified wages. See:
Qualified health plan expenses are properly treated as qualified wages if the allocation is made on a pro rata basis among covered employees and pro rata on the basis of periods of coverage .
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This Page Is Not Current
Find current guidance on the Employee Retention Credit for qualified wages paid during these dates:
- After December 31, 2020 and before July 1, 2021 Notice 2021-23 PDF, Notice 2021-49 PDF and Revenue Procedure 2021-33 PDF
- After June 30, 2021 and before January 1, 2022 Notice 2021-49 PDF and Revenue Procedure 2021-33 PDF
These FAQs do not reflect the changes made by the Taxpayer Certainty and Disaster Tax Relief Act of 2020 , enacted December 27, 2020, or the American Rescue Plan Act of 2021 , enacted March 11, 2021. The Relief Act amended and extended the employee retention credit under section 2301 of the CARES Act for the first and second calendar quarters of 2021. The ARP Act modified and extended the employee retention credit for the third and fourth quarters of 2021.
This FAQ is not included in the Internal Revenue Bulletin, and therefore may not be relied upon as legal authority. This means that the information cannot be used to support a legal argument in a court case.
Why Would An Employer Want To Hire A 1099 Vs W2 Employees
There are many benefits to the employer in hiring a 1099 worker in lieu of a permanent employee. For starters, they have more flexibility in letting a 1099 worker go. They do not have to pay into the states unemployment fund.
They also are not required to provide benefits. For example, laws like the Affordable Care Act require employers to provide health insurance to their employees.
Independent contractors and freelance employees fall outside the law. Therefore, the employer can save on indirect labor expenses by using 1099 workers.
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Situations Where You Are Not Considered To Have Collected The Gst/hst
You are not considered to have collected the GST/HST on taxable benefits provided to employees in any of the following situations:
- the property or services that give rise to a taxable benefit are GST/HST-exempt or zero-rated
- a taxable benefit results from an allowance included in the income of the employee under paragraph 6 of the Income Tax Act
- you are restricted from claiming an input tax credit in the situations described in section “ITC restrictions” for the GST/HST paid or payable on the property and services that give rise to the taxable benefit
- the property or services that give rise to a taxable benefit are supplied outside Canada
Example
You, as an employer who is a GST/HST registrant, would like to reward an employee for outstanding performance, and you have agreed to pay for hotel accommodations and three meals a day, for one week, in London, England. An amount will be included in the income of the employee as a taxable benefit. However, you will not be considered to have collected tax in respect of the benefit provided to the employee, since the supplies were made outside of Canada.
Also, if the taxable benefit is for the standby charge or operating expense benefit of an automobile or an aircraft, you are not considered to have collected the GST/HST on this benefit in the following situations:
Note
For An Eligible Employer Who Sponsors A Self
An Eligible Employer who sponsors a self-insured group health plan may use any reasonable method to determine and allocate the health plan expenses, including the COBRA applicable premium for the employee typically available from the administrator, or any reasonable actuarial method to determine the estimated annual expenses of the plan.
If the Eligible Employer uses a reasonable actuarial method to determine the estimated annual expenses of the plan, then rules similar to the rules for insured plans are used to determine the amount of health plan expenses allocated to an employee. That is, the estimated annual expense is divided by the number of employees covered by the plan, and that amount is divided by the average number of work days during the year by the employees . The resulting amount is the amount allocated to each day of qualified wages. Adjustments should be made for employee after-tax contributions.
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Do I Qualify For Health Insurance After I Lose My Job What About My Family
Unless you work for the government or a church, and as long as you are employed by a business with 2 or more employees, you are a covered employee and eligible to continue your group health coverage. There is no requirement that you work for your employer for a certain amount of time. Your employer must also offer you a COBRA extension even if you are also covered by another policy, such as a spouses policy through his or her job.
Can I Use A Health Savings Account To Pay For A Marketplace Plan
When you shop on the Marketplace for a plan, you may be able to pay your premiums with pre-tax dollars through a Health Savings Account . A Health Savings Account is a special type of savings account. It lets you set aside pre-tax dollars for certain kinds of qualified health expenses. Using an HSA can help you lower your healthcare costs overall through the use of pre-tax dollars. However, when it comes to the Marketplace, only certain plans let you use your HSA to pay for premiums. That means you would need to decide that enrolling through the Marketplace is the best option for you and then look specifically for an HSA plan.
And unless you get a High-Deductible Health Plan , you wont be able to use pre-tax dollars for your premiums. On average, plans with deductibles of at least $1,350 for an individual qualify as being HDHP. Likewise, plans with deductibles of $2,700 for a family generally qualify as being a HDHP. When you shop on the Marketplace, you can see which plans are HSA-eligible. Should you be able to use your HSA for your premiums, keep in mind that in 2018, the maximum amount you could contribute from an HSA for a HDHP was $3,450 for an individual and $6,900 for a family.
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How Is My Cobra Affected If I Left Work Due To A Disability
If you leave work because of a disability, and the Social Security Administration finds you to be disabled and entitled to Social Security Disability Insurance or Supplemental Security Income , you are eligible for an additional 7 months of coverage from the previous maximum of 29 months of Federal COBRA for a total of 36 months. If you are receiving Social Security benefits and are disabled, you should be entitled to Medicare coverage at the end of the 36-month COBRA extension. Note: People who are disabled must notify their COBRA administrator of their determination of disability by SSA within 60 days of the disability determination notice in order to qualify for the 7-month extension.
Employment Insurance Premium Rebate
As an employer, you may be eligible for a reduction in the employer EI premium rate that you use to calculate your share of the EI premiums if you offer income protection coverage, such as a wage loss replacement plan or other income maintenance plan, to your employees that reduce the EI benefits payable to an employee. For more information, go to How to reduce the EI premium rate if you provide your employees with a short-term disability plan.
If you are granted an EI premium reduction, you will calculate your employer’s EI premiums using a rate that is lower than the standard employer rate of 1.4 times the employees’ EI premiums.
You have to return 5/12 of any savings to your employees in the year in which you received the EI premium reduction, or within the first four months of the following year. This savings can either be given to your employee in cash, such as a cash allowance or a cash rebate, or indirectly through increased employer contributions to an employee’s health and welfare trust, group sickness or accident insurance plan, private health services plan, or in any other manner. These indirect benefits will only be tax-free if they are given to the employee in the form of a benefit specifically exempt from taxation under paragraph 6 of the Income Tax Act.
Note
If the benefit is taxable you must include it in your employee’s income in the year the employee received it. For more information, see Benefits chart.
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Property Acquired Before 1991 Or From A Non
If you acquired property before 1991, you did not pay the GST/HST. Also, you do not generally pay the GST/HST when you acquire property from a non-registrant. As a result, you cannot claim an ITC under these circumstances. However, if you make this property available to your employee and the benefit is taxable for income tax purposes, you may still be considered to have collected the GST/HST on this benefit.
Example
You bought a passenger vehicle from a non-registrant and made it available to your employee throughout 2020. The passenger vehicle is used more than 90% in the commercial activities of your business. You report the value of the benefit, including the GST/HST and if applicable, the PST, on the employee’s T4 slip. For GST/HST purposes, you will be considered to have collected the GST/HST on this benefit even if you could not claim an ITC on the purchase of the passenger vehicle.
Examples for remitting GST/HST on employee benefits
The following examples will help you apply the rules for remitting the GST/HST on employee benefits.
Automobile benefit See examples in the section on Automobile benefits standby charges, operating expense benefit, and reimbursements.
HST considered to have been collected on the motor vehicle benefit = $5,100 × 14/114 = $626.32
Note
The calculation of the amount of GST/HST you are considered to have collected on the motor vehicle benefit differs from that of an amount calculated on an automobile benefit.
Reporting Information On Health Coverage By Employers And Insurance Companies
The health care law requires the following organizations and some other parties to report that they provide health coverage to their employees:
- Certain employers, generally those with 50 or more full-time and full-time equivalent employees
- Health insurance companies
Learn more about these reporting requirements from the IRS.
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What Is The Difference Between Full
The main difference between a full-time and part-time weekly schedule is simply that part-time employees work fewer hours than full-time employees. Other than that stipulation, the Fair Labor Standards Act does not define nor differentiate between part-time and full-time employees. It is up to the employer to define these criteria. Employers should be mindful of other laws that may dictate what is considered part-time as well.
Employer Health Insurance Continuation Laws
If your employer does offer group health insurance, you have the right to continue it after you leave employment. The federal Consolidated Omnibus Budget Reconciliation Act requires employers with 20 or more employees to allow their employees to continue health care coverage at their own expense.
If you quit, are laid off, or are fired for reasons other than gross misconduct, you can continue to receive your group health coverage, as long as you pay the full amount of the premium.
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Loyalty And Other Points Programs
Your employees may collect loyalty points, such as frequent flyer points or air miles, on their personal credit cards when travelling on business trips, even though you reimburse them for the amounts they spend. Usually, these points can be exchanged or cashed in for rewards .
Your employees do not have to include in their income the value of the rewards they received or enjoyed from the points they collect on these business trips, unless any of the following apply:
- the points are converted to cash
- the plan or arrangement between you and the employee seems to be a form of remuneration
- the plan or arrangement is a form of tax avoidance
If any of the conditions above are met, the employee has to declare the fair market value of any personal rewards they received on an income tax and benefit return.
Note
If you control the points you have to report on their T4 slip the FMV of any personal rewards they received from redeeming the points.
For examples of situations where loyalty and other points programs are considered taxable benefits, go to Loyalty and other points programs.
Why Does The Size Of An Employers Workforce Matter
- If you have fewer than 25 full-time employees, including full-time equivalent employees, you may be eligible for a Small Business Health Care Tax Credit to help cover the cost of providing coverage.
- Generally, employers with 50 or fewer employees may be eligible to buy coverage through the Small Business Health Options Program or . Learn more at HealthCare.gov.
- If you have 50 or more full-time employees, including full-time equivalent employees, you are an applicable full-time employer and need to issue statements to employees and file an annual information return reporting whether and what health insurance you offered employees. ALEs are subject to the employer shared responsibility provisions.
- Some states allow employers with up to 100 employees to buy coverage through the Small Business Health Options Program, or SHOP Marketplace.
- Regardless of size, all employers that provide self-insured health coverage to employees must file an annual return reporting certain information for each covered employee and provide the same information to covered individuals.
Certain affiliated employers with common ownership or employers that are part of a controlled group are considered part of an aggregated group. In this case, you must aggregate, or combine, your employees to determine your workforce size. Learn more on the page for Determining if an Employer is an Applicable Large Employer.
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