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Nanny Fringe Benefits
Important Domestic Employment Payroll/Compensation
Annual Updates

HomeWork Solutions, Inc., February 2007

Mileage Reimbursement: Effective January 2008 the standard mileage rate becomes 50.5 cents a mile. The 2007 rate was 48.5 cents per mile.

The standard mileage rate is established by the IRS, and the rate is customarily used by employers to reimburse employees for the business use of their personal automobiles. The rate typically adjusts once per year, with announcements made in November for the coming year's rate.

Insurance Benefits: The IRS will allow the employer to pay the cost of an accident or health insurance plan for employees, including an employee's spouse and dependents. These premium payments are not wages and are not subject to social security, Medicare, and FUTA taxes, or federal income tax withholding. Generally, this exclusion also applies to qualified long-term care insurance contracts. To qualify, this benefit must be offered to all similarly situated employees. The employer should write the premium payment check directly to the insurer.

Social Security Wage Base: The Social Security wage base for 2008 is $102,000, increasing from $97,500 in 2007 . The maximum amount an employee can have withheld for Social Security tax in 2008 is $6324. Employers must contribute funds equal to the amounts withheld from employees for both Social Security and Medicare (which has no wage base).

Qualified Transportation Fringe Benefit: The tax-free amount an employer may reimburse an employee monthly under a qualified transportation fringe benefit plan is $115 in 2008, up form $110 in 2007. See Related Article

Educational Assistance: The annual tax free amount for employer-provided educational assistance is $5,250 for 2006 and 2007 and now also applies to graduate-level course work. According to the IRS, "Employers offering tax-free educational assistance are required to have a written plan describing the benefit and the terms under which it is available." (Notice 97-60 Exclusion For Employer-Provided Educational Assistance). An employer may pay for any form of instruction or training that improves or develops an individual's capabilities, whether or not job-related or part of a degree program under a qualified education assistance program without defeating the non-taxable status of the benefit supplied to the employee. MORE INFORMATION

 Internal Revenue Service
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