Publication 15-B: a Key Resource for Employers

The IRS has released a draft version of Publication 15-B: Employer's Tax Guide to Fringe Benefits for 2025, a document for employers seeking to understand their responsibilities regarding fringe benefits. This guide provides detailed instructions on the tax treatment of various benefits, helping businesses comply with federal tax laws and avoid costly penalties.

What Is Publication 15-B?

Publication 15-B serves as a comprehensive resource that outlines the rules and regulations governing fringe benefits—non-wage compensations provided to employees. These benefits can include health insurance, retirement plans, use of a company car, tuition assistance, employee discounts, and other perks.

The guide is updated annually to reflect changes in tax laws, IRS regulations, and limits that affect fringe benefits. Employers use it to determine:

1. Taxability: Whether a benefit is taxable to employees.
2. Exclusions: Which benefits can be excluded from employees' taxable income.
3. Reporting: How to properly report benefits on employee W-2 forms.
4. Withholding: The appropriate taxes to withhold for taxable benefits.

The 2025 draft version allows employers to review potential updates for the coming tax year and make any necessary adjustments to their policies before the final version is published.

How Is Publication 15-B Used?

Employers rely on Publication 15-B to navigate the complexities of fringe benefits taxation. Key uses of the guide include:

1. Determining Taxable vs. Nontaxable Benefits: For instance, employer-provided health insurance premiums are typically nontaxable, while the personal use of a company car may be taxable. The guide provides clear criteria for classifying benefits.
2. Understanding Benefit Exclusions: Some benefits, like qualified transportation fringe benefits and de minimis (minor) fringe benefits, may be excluded from employees' taxable wages if certain conditions are met.
3. Calculating the Value of Benefits: The guide explains how to value taxable benefits, such as fair market value, and offers examples for complex scenarios.
4. Compliance with Reporting Requirements: Publication 15-B provides step-by-step instructions for reporting taxable fringe benefits on employee W-2 forms and withholding federal income tax, Social Security, and Medicare taxes.

Why Is Publication 15-B Important for Employers?

Failing to correctly handle fringe benefits can result in compliance issues, penalties, and even audits. Publication 15-B empowers employers by providing the tools and knowledge to:

• Avoid Errors: Misclassifying or incorrectly valuing benefits can lead to underreporting or overreporting taxable income, causing problems for both employers and employees.
• Stay Updated: Tax laws and regulations change frequently. The draft version of Publication 15-B ensures employers are aware of upcoming updates before they become mandatory.
• Enhance Employee Trust: Properly managing fringe benefits demonstrates an employer’s commitment to transparency and compliance, fostering trust among employees.

Key Highlights of the Draft

The draft version of Publication 15-B includes updates that employers should be aware of, such as:

• Changes to benefit limits
• Revisions to the tax treatment of certain benefits.
• New compliance guidelines reflecting recent legislation.

Employers should review the draft carefully to anticipate any changes that may affect their benefit offerings or payroll processes.

Take Action

Employers should take the following steps in response to the release of the draft:

• Review the Draft: Identify any updates relevant to your organization’s benefit programs.
• Consult Advisors: Work with tax professionals or legal advisors to ensure compliance with any changes.
• Communicate with Employees: If updates impact employee benefits, provide clear and timely communication to your workforce.
• Adjust Systems: Update payroll and HR systems to reflect any changes to the valuation, reporting, or taxation of benefits.

Publication 15-B is more than just a guide—it’s a roadmap for employers to manage fringe benefits effectively and comply with tax laws. Staying informed and proactive ensures your organization is well-prepared for the coming tax year.

Benefit Allocation Systems (BAS) provides best-in-class, online solutions for: Employee Benefits Enrollment; COBRA; Flexible Spending Accounts (FSAs); Health Reimbursement Accounts (HRAs); Leave of Absence Premium Billing (LOA); Affordable Care Act Record Keeping, Compliance & IRS Reporting (ACA); Group Insurance Premium Billing; Property & Casualty Premium Billing; and Payroll Integration.

MyEnroll360 can Integrate with any insurance carrier for enrollment eligibility management (e.g., Blue Cross, Blue Shield, Aetna, United Health Care, Kaiser, CIGNA and many others), and integrate with any payroll system for enrollment deduction management (e.g., Workday, ADP, Paylocity, PayCor, UKG, and many others).