A fringe benefit is a form of compensation your employer provides in addition to your regular wages. In some cases, the IRS treats these benefits as taxable income, which means they may be included on your Form W-2.
Taxable fringe benefits are generally reported on your Wage and Tax Statement (Form W-2) and may increase the wages shown on your form. However, not all fringe benefits are taxable. The IRS allows certain benefits to be excluded from income if they meet specific requirements.
The type of benefit you receive determines whether it must be reported on your Form W-2. For a complete list of taxable and nontaxable fringe benefits, see IRS Publication 15-B, Employer's Tax Guide to Fringe Benefits.
Example of a Taxable Fringe Benefit
Your employer may provide a company vehicle for business use. If you're also allowed to use that vehicle for personal purposes, such as commuting to and from work, the value of that personal use may be considered a taxable fringe benefit and reported on your Form W-2.
What Should You Do?
If fringe benefits appear on your Form W-2, review any information your employer provided about the benefit. The amount reported is generally already included in the wage information on your W-2, so you can typically enter the form as received when preparing your tax return.
Additional Information
For additional details about fringe benefits and their tax treatment, refer to IRS Publication 15-B.