How Do I Report Fringe Benefits on a W-2 Form?

Employers must enter the value of certain fringe benefits in Boxes 1, 3, and 5 on W-2 forms. Not all fringe benefits for employees are taxable, but most do require that you report them. Federal income tax, Social Security tax, Medicare tax, and FUTA all affect the value of a fringe benefit. A separate form that employers must use to report the value of a fringe benefit is Form 940. Include the value on line 3 of the form. Exclude some or the entirety of a fringe benefit from taxable income if you do not classify the recipient as an employee. Do not subject income tax withholding to the fringe benefits of independent contractors. Review whether you need to report the income on a Form 1099-NEC for contractors or on a Schedule K-1 for partners.

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