VA. Sheriffs’ Association Annual Conference

By Wendy SpeelmanFederal, State & Local Government Specialist 9/16/14

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Uniform Requirements

For uniforms to be nontaxable and not be included in the employee’s wages they must:

•Be required by employer to be worn• Must be in written policy

• Can’t be optional if they wear them

•Not be adaptable to every day street wear

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How Clothing is Purchased

• Uniform rules applies to: • If the employer purchases the clothing

• If the employee purchases and the employer reimburses the employee

• If purchased thru a rental company

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Accountable Plan

• Allowances paid through non- accountable plan are Taxable• If give employee $200 for uniform and they

don’t provide substation (receipts) then must include in W-2

• Business Connection

• Return excess in reasonable time

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Law & Court Cases

• If clothing suitable for taking the place of regular clothing, include in W-2• IRC 162 & 262• Mella v. Commissioner T.C. Memo 1968-594

• Not enough that the employee does not wear the clothing away from work• Pevsner v. Commissioner 628 F.2d 467

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Examples of Non Uniforms

•Ball Caps

•T-shirts

•Socks

•All shoes unless steel toe (safety)

•Tactical/BDU pants

•Polo Shirts

•Plain belts

•Shorts

•Under Armour

•Gloves - patrolman

•Sweatshirt

•Carhart jacket

•Jeans

Employer-Provided Vehicles

• Personal Use is taxable & included in wages• Includes commuting

• Business Use is not taxable

• No record kept then all taxable

• Exception: qualified non-personal use vehicle (QNPV)

Qualified Non-personal Use Vehicle

• Must have policy on restricting personal use of the vehicle

• Commuting is nontaxable to the employee

• Substantiation and record keeping is not required

Examples of QNPV

• Clearly marked police and fire vehicles if:• The employee is always on call

• Require to be used for commute

• The employer must prohibit personal use for travel outside of the officer jurisdiction

• Readily apparent the vehicle is a public safety vehicle (words or painted insignia)

Examples of QNPV continued

• Unmarked law enforcement vehicles if:• Any personal use must be authorized by the

employer and must be incident to law-enforcement functions

• The employer must be a govt. unit responsible for prevention or investigation of crime

• Law enforcement officer must be full time, execute warrants, make arrests & carry firearm

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Not a qualified vehicle

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Day Meals

• If the employer reimburses or pays for meals on a day trip then:• Include the cost of meal reimbursed to the

employee in their payroll as a fringe benefit

• Subject to Federal Income Tax, Medicare and SS if regular wages are subject to SS and Medicare

• Revenue Ruling 75-432 & 75-170

Day Meals continued

• If union contract says to pay for meals then reimburse but include in wages

• If have policy to pay for meals if traveling out of county it is still taxable and included in wages • Must include in payroll the amount of lunch

as a noncash item

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Meals at Conferences

• “Associated With” Meals - Tax-Free not included in wages• Meals at conventions

• Meals at conferences

• Does not include going to lunch with co-worker (this would be personal & taxable = include in wages)

• Behavioral Control - how, when and where to do the work; training

• Financial Control - significant investment, expenses, opportunity for profit or loss

• Relationship of the Parties - employee benefits, written contracts

Independent Contractor or Employee

Resources

• Publication 1779 - determination on status of worker as either an independent contractor or an employee

• Publication 963 Chapter 3

• Revenue Ruling 87-41 – 20 factors

• Internal Revenue Code 3401

Supplemental Pay

• Compensation paid in addition to regular wages

• Examples: overtime pay, bonus

• Withhold federal income tax at 25%

• Or use formula

• Subject to Medicare and SS if applicable

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Department of the Treasury Internal Revenue Service

www.irs.gov