Employee Apparel Fringe Benefit Reporting

Tax and Revenue Services

Employee apparel fringe benefit reporting was implemented on January 1, 2020.

Guidelines

Mandatory reporting is required through the following process and form in order to comply with tax law regarding apparel provided to university employees purchased with institutional or foundation funds, or provided as part of an apparel allowance or merchandise credit through a third-party.

Requirements

  1. Apparel purchases by departments will be ordered using expense account code 74532- Supplies- Apparel Purchases to assist with tracking and reconciling apparel purchases and distributions.
  2. “Employees” includes currently employed full and part time employees, student employees, and graduate assistants identified in the Human Resources/Payroll system.
  3. When arranging to provide a taxable fringe benefit of apparel to an employee, a department should complete a Taxable Fringe Benefit Reporting Form.
  4. Any employee receiving apparel will need to sign the Taxable Fringe Benefit Reporting Form to accept individual items of apparel provided to them. Employees will be notified that receipt of items of apparel provided by the institution and valued over $100 in one calendar year constitutes a taxable fringe benefit.
  5. The department is responsible for determining the fair market value of the item provided if the source of the apparel is part of an apparel allowance or merchandise credit through a third-party.
  6. The fair market value for apparel which is purchased will be determined using the vendor invoice.
  7. The department will submit to the Office of Tax & Revenue Services the Taxable Fringe Benefit Reporting Form for each employee participating in the distribution. The department will attach the related invoice documenting the fair market value or a statement of fair market value for apparel allowance or merchandise credit items.
  8. The tracking year for the reporting is November through October. Taxable Fringe Reporting Forms are completed throughout the year and forwarded to the Office of Tax & Revenue Services. All forms must be turned in by fifth working day in November for reporting and payroll purposes.
  9. Records of apparel distribution will be accumulated in the Office of Tax and Revenue throughout the tracking year.
  10. When any employee receives distributions of apparel with a combined value over the university established de minimis value ($100) in any tracking year, the employee’s December pay stub will reflect the value above the de minimis value. Income tax related to the value of apparel received will be withheld from the employee’s December paycheck. The tax implication is estimated to be 25% of the value of the items received.

Optional Reporting

  1. There is an option available to all departments to compensate the employee for the tax withheld. This is not mandatory. The department can provide payment of the estimated tax liability through an extra compensation form.
  2. If a department distributes apparel valued over $100 to an individual employee in a tracking year, the department can choose to offset the income tax consequence for the employee by submitting a Request for Extra Compensation for Taxable Fringe Benefit Form by the fifth working day in November. This Request for Extra Compensation for Taxable Fringe form would authorize a payment equal to 25% of the value of apparel over $100. The payment would be processed in December when the taxes are withheld.

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