CLOTHING PURCHASED FOR EMPLOYEES: FUND & TAXABILITY ISSUESMAY 2010

Pittsburg State University

PURPOSE OF POLICY Provide guidance on the taxability of

clothing purchased for employee wear. Provide information on what funding

sources may be used for clothing purchases.

Apply consistently across campus. Ensure compliance with IRS

regulations.

IRS PUBLICATION 15-B: FRINGE BENEFITS A fringe benefit is a form of pay for the

performance of services. Examples:

Employer-Provided Vehicle or Transportation Athletic Facility Educational Assistance Employer-Provided Lodging

Any fringe benefit provided by the employer is taxable and must be included in the recipient's pay unless the law specifically excludes it.

IRS PUBLICATION 15-B: FRINGE BENEFITS Fringe benefits that are excluded from

taxation include: De minimis (minimal) benefits (cost and

frequency) Working condition benefits

IRS PUBLICATION 15-B: FRINGE BENEFITS Working Condition Benefits are not

taxable to the employee. Applies to property and services provided

to an employee to perform his or her job. Applies to the extent that the employee

could deduct the cost of the property or service as a business expense or depreciation expense if he or she had paid for it.

IRS PUBLICATION 529 - DEDUCTIONS Individual can deduct only unreimbursed

employee expenses that are ordinary and necessary.

An expense is ordinary if it is common and accepted in your trade, business, or profession.

An expense is necessary if it is helpful to your business.

An expense does not have to be required to be considered necessary.

IRS PUBLICATION 529 - DEDUCTIONS Individual may be able to deduct the following

as unreimbursed employee expense: Work clothes and uniforms if required and not

suitable for everyday use. “It is not enough that you wear distinctive clothing.

The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.”

STATE OF KANSAS - GIFTS Kansas law prohibits state employees from

accepting or requesting meals, gifts, entertainment and travel with a few exceptions: State employees are prohibited from soliciting or

accepting any gift because of his/her official position. Exceptions:

Gifts valued at less then $40 given at ceremonies or public functions when attended in your capacity as a state employee.

Gifts from relatives or personal friends. Gifts accepted on behalf of the state that become the property

of the state.(Source: SOK Governmental Ethics Commission – Conflict of Interest Guidelines for State Employees)

TYPES OF CLOTHING PURCHASED Uniform Business attire Protective clothing Other clothing

TYPES OF CLOTHING PURCHASED- UNIFORM

Required by PSU to be worn in the performance of assigned duties.

Not suitable for taking the place of regular clothing.

Remains the property of PSU.Departments with approved Uniforms:• University Police (police officers only)• Student Health Center (medical staff only)

TYPES OF CLOTHING PURCHASED– BUSINESS ATTIRE

A shirt is the only item of clothing that qualifies as Business Attire.

Makes the employee easily identifiable as a PSU employee who is serving in an official capacity.

“Pittsburg State University”, “PSU” or the PSU logo and the name of the College, Department or group printed or monogrammed where it is clearly visible.

Worn at work and/or at events specified by the Dean, Director or Chair and only when serving in an official capacity for PSU.

Cannot be worn for everyday wear. Remains the property of PSU until the purchase value is

depreciated.Department has a written policy covering these items.

TYPES OF CLOTHING PURCHASED – PROTECTIVE CLOTHING

Worn over or in place of regular clothing to protect the employee from damage or abnormal soiling, or to maintain a sanitary environment.

May include serving aprons, laboratory coats and shop coats.

TYPES OF CLOTHING PURCHASED – OTHER CLOTHING

Any article of clothing that does not meet the definition of Uniform, Business Attire or Protective Clothing.

FUNDING – UNIFORMS & PROTECTIVE CLOTHING

May use General Use funding (OOE).

FUNDING – BUSINESS ATTIRE May be paid from

Restricted Fee accounts Foundation accounts Local accounts

If paid from a Restricted Fee account supported by student fees, program must allow the purchase of clothing.

If purchased for a specific event, the event must be recognized on the shirt (e.g. Pitt Cares, RHA, Rumble in the Jungle, Grad Finale, SAC).

FUNDING – OTHER CLOTHING May be purchased by the department

but ONLY from Foundation accounts.

FUNDING - MISCELLANEOUS If money is collected from individuals for the cost of

clothing, deposit funds in a restricted fee account. Sales tax must be collected. Department is responsible for depositing money

collected from individuals with the Cashier’s Office. A list of the individuals, as well as proof of

deposit(s) must accompany the request for payment to the clothing vendor.

No advancement of PSU funds may be used to purchase clothing when it is being paid for by an individual.

TAXABILITY Uniforms, Business Attire & Protective

Clothing: NOT A TAXABLE FRINGE BENEFIT TO THE EMPLOYEE

Other Clothing: TAXABLE FRINGE BENEFIT TO THE EMPLOYEE UNLESS THE VALUE OF THE CLOTHING IS DE MINIMIS ($15 or less per item)Note: Items that cost $15 or less are

not de minimis if provided to the employee on a regular basis.

TAXABILITY If the clothing is a taxable fringe benefit to the

employee, the cost of the item adds to the following: Added to Federal Taxable Gross (Employee) Added to State Taxable Gross (Employee) Added to Social Security & Medicare Gross (Employee &

Employer) Added to KPERS Gross, including Buyback (Employee &

Employer) Added to Unemployment Compensation Insurance Gross

(Employer) Added to Workers Compensation Insurance Gross (Employer) Added to Death & Disability Gross (Employer)

TAXABILITY Taxability determination must be made

if a department wants to purchase an item of Other Clothing as Business Attire.Determination of Taxability Form – Clothing Purchased for Employee(s)

AUTHORITY & RESPONSIBILITY Dean, Director or Chair determines the

appropriateness of the clothing expenditure. Decision Factors:

Cost Budget Business Use Public Contact Personal Safety Consistency

Approval of Dean, Director or Chair is required on the invoice.

AUTHORITY & RESPONSIBILITY If Uniforms or Business Attire are purchased for employees,

a departmental policy should include the following: List of employees and/or positions eligible for Uniforms or

Business Attire. Frequency of purchase. Dollar limit of clothing item, if applicable. Specific time/events when clothing is to be worn. Statement that the clothing is to be worn only while performing

official PSU duties. Disposition of clothing item when employee leaves employment. Depreciation time frame for clothing.

The policy should be communicated to the employees who are provided with the Uniforms or Business Attire.

PROCEDURES FOR PURCHASE & PAYMENT1. Department purchases the Uniforms, Business Attire (Shirts), Protective

Clothing or Other Clothing .2. Initiate payment using a Department Purchase Request (DPR) or the PSU

Business Procurement Card (BPC): Note on the invoice or attach a paper listing the names of the employees, their PSU

ID#’s and the clothing items attributed to each. Include proof of deposit if money collected from individuals for the cost of clothing

was deposited in a restricted account. Approval for the use of funding by the authorized signature and approval for the

purchase of clothing are required. If the authorized signature is a Director, Chair or higher, the authorized signature can approve the purchase as well as the use of the funding. It the authorized signature is lower than a Director or Chair, an approval signature from the appropriate Director, Chair or higher is also required on the invoice.

Submit the invoice with required employee information and approvals with the DPR or BPC log.

Note that departmental adherence to the clothing policy is implied by the signature approval provided on the payment request.

PROCEDURES FOR PURCHASE & PAYMENT – OTHER CLOTHING Department will follow the procedures previously noted. The Business Office will send the list of employees who receive

items of Other Clothing that cost more than $15 per item to HRS to be included as a taxable fringe benefit to the employee(s) receiving the items. Note that Other Clothing can only be paid from Foundation funds.

The department may request a review to determine if the Other Clothing items qualify as Business Attire (not a taxable fringe benefit). To initiate a review, PRIOR TO SENDING the payment request to the Business Office, the department completes a “Determination of Taxability Form” and submits to HRS with the DPR/BPC log, invoice and the information previously noted. Upon completion of the, review, HRS will notify the department of the decision and forward all documents to the Business Office for payment.

AUDITING

Periodic audits will be conducted to ensure compliance.

FOR MORE INFORMATION Fund Issues:

Geri Krumsick (gekrumsi@pittstate.edu or x. 4150)

Christina Davis (cdavis@pittstate.edu or x. 4159) Kim Wilson (kwilso@pittstate.edu or x. 4168)

Taxability Issues: Michele Sexton (msexton@pittstate.edu or x.

4188) Diane Letner (dletner@pittstate.edu or x. 4096)

QUESTIONS?????