The expenses/reimbursements listed below are reported by Accounting Services to the Human Resources System (HRS) and appropriate federal, state, and FICA taxes will be withheld. These payments will also be included in gross income on employees’ W-2 forms.
What Employee Fringe Benefits are paid and reported through Accounting Services (e-Reimbursement System):
- Non-Overnight Meals
- Educational Assistance
- Accountable Plan Payments made after 90-day rule
Employee Fringe Benefits Processing through e-Reimbursement
Effective January 1, 2020, when fringe benefits are paid though e-Reimbursement, the employee claimant can have estimated tax withheld from the payment instead of the taxes being withheld at the end of the payment month from their paychecks.
On TravelWIse, the last document under “Documents for the Traveler/Employee” has the walkthrough: https://www.wisconsin.edu/travel/support/expense-system-tutorials/
Additionally, this how-to is linked within e-Reimbursement: https://www.wisconsin.edu/travel/download/ter_help_sheets/General-Expenses-Help-Sheet.pdf
As to the reason for the 30% estimate tax recommendation, this is the amount the Service Center recommends as a safe amount so employee paychecks would not be impacted, since each employee can fill out the W-4 any way they want. 30% is normally the max, therefore the Service Center recommends this amount.
How estimated tax on e-reimbursement Fringe Benefits is processed and how it appears on the employee paycheck stub:
- The reason for the estimated tax amount on an employee’s reimbursement for relocation/moving expense is so the employee’s paycheck is not impacted since the tax has already been withheld.
- The expense module (e-Reimbursement) does not pay any taxes; it puts an estimated tax withholding amount into an account. When the taxable fringe charge is put into the Human Resources Systems (HRS), a deduction refund matching this estimated account is also put onto the employee’s check under the Deductions section of their pay statement. Taxes are withheld in HRS according to the full amount of the taxable fringe charge – the deduction refund offsets their taxes. Taxes are withheld at the rate applicable to the W-4 the employee has on file in HRS for their regular paychecks. Tax rates are based on the IRS graduated scale for the classification on the employee’s W-4 on file with HRS.
- In the earnings statement you will note the high amount of tax, and the taxable fringe charge. Both of these are on the paycheck correctly. You will also see the deductions are a negative number on the paycheck, indicating a refund. Check the deductions tab and you will see that the refund has been made.
In summary: on the employee’s pay statement the taxes on the payroll plus the fringe benefits is calculated, then the refund of the amount taken out in e-Reimbursement is entered as a refund–therefore the deductions amount is normally negative.
Employee Fringe Benefits Reporting Year
Fringe benefits are taxed and reported on the employee’s W-2 in the fringe benefit tax reporting year in which they are paid. The UW fringe benefit tax reporting year is from November 1st through October 31st of each year. For example: if a fringe benefit is paid in November 2019 or December 2019, UW will tax and report these on the W-2 for 2020.
In general, employee reimbursements for meals are not taxable and not reportable to the IRS. The only exception is for meals not associated with an overnight stay and not related to recruiting of students or job applicants. These meals are called Non-Overnight Meals.
Effective January 1, 2018 through December 31, 2025:
- The new law (Tax Reform) suspends the exclusion of qualified moving expense reimbursements from gross income and wages for calendar years 2018 through 2025.
- All moving expenses are considered taxable to the employee and included as taxable income and proper taxes withheld (Federal, State, FICA) based on the W-4 on file with Payroll for individual employees.
- If actual move happened prior to January 1, 2018:
- Tax Compliance Office will apply tax law in effect prior to January 1, 2018
- If actual move happened after December 31, 2017:
- Tax Compliance Office will apply new tax law effective January 1, 2018
If you have any questions please contact the Tax Compliance Office at email@example.com or (608) 262-0582.
Reimbursements to employees for job-related training are not taxable or reportable. To qualify as job-related, the training must be:
- required by the employer or required as a condition to the retention of an established position or status (e.g., continuing professional education courses), or
- taken to maintain or improve skills required in the employee’s present position.
In addition, the training cannot be required to meet the minimum educational requirements for the employee’s position or qualify the employee for a new trade or business. All other training is considered career-related.
Graduate and Undergraduate career-related tuition reimbursements are not taxable or reportable for tax reporting purposes unless they exceed $5,250 in a calendar year. When the payments exceed $5,250 the excess over $5,250 is the only part reported by Accounting Services to the Human Resources System (HRS) and appropriate federal, state, and FICA taxes to will be withheld. Only the excess over $5,250 will be included in gross income on employees’ W-2 forms.
Accountable Plan Payments Made After 90 Day Rule
Find details on payments in the UW-3024 Expense Reimbursement Policy
Employee Tax Reportable Fringe Bi-Weekly and Calendar Year End Reporting Process
Employee tax reportable fringes that flow through Accounting Services are (1) taxable non-overnight meals, (2) taxable moving, (2) non-taxable moving, (3) taxable educational expense reimbursements, and (4) taxable accountable plan (Non-Accountable Plan – NONA) payments (effective 01/01/2017).
Employee tax reportable fringes and non-accountable plan payments that flow through Accounting Services are sent through to the Service Center for tax deductions from the employee’s paycheck and to be added to the employee’s W-2 boxes 1, 3, 5, and 16 since they are treated the same as regular wages for tax purposes. Note that for educational expense reimbursements there is a $5,250 exclusion before it is taxable. Non-taxable moving amounts are sent to the Service Center for inclusion on their W-2 for informational purposes, but no taxes are withheld.
As of July 2021, all UW System employees who were paid monthly, including UW-Madison employees, were moved to a biweekly pay schedule. To accommodate this change in the fringe benefit reporting process, the UW will continue a monthly download all employee tax reportable fringe benefits paid through the e-Reimbursement System (Accountable Plan). However, for monthly amounts great than $500, the UW will split the monthly fringes between the next two available payroll checks following the month in which the reimbursement payment was made. For example: if the employee is paid $10,000 on January 2021 the Tax Compliance and Reporting Office will download these reimbursements the first week in February 2021 and report them to Payroll in two equal amounts of $5,000 impacting the next two available paychecks.
The two fringes that flow through Accounting Services that get broken out separately on the W-2 are non-taxable moving (box 12, code P) and taxable moving (box 14):
- W-2 Box 12. Codes P – Non-taxable moving expense reimbursements paid directly to employee (not included in Boxes 1, 3, 5, or 16).
- W-2 Box 14. Other – This box is used for additional information regarding taxable compensation or reimbursements. MOVE – This is the taxable portion of your moving expense reimbursements. Boxes 1, 3, 5 and 16 have been increased by this amount.
Foundation reimbursements and non-accountable plan payments are treated the same way as other fringes processed through Accounting Services. Foundation reimbursements are coded FDTN while non-accountable plan payments are coded NONA.
More information is available in the UW Shared Services “Explanation of W2 Tax and Wage Statements” document (PDF).
21 N. Park Street
Madison, WI 53715
Jose A. Carus, Jr.
Tax Compliance Manager