[font=Calibri]During a recent public seminar a participant brought up anIRS audit their company had experienced and one of the adjustments made by the auditor. The IRS had made a significant adjustment regarding company provided uniforms. The company provided logo wear to their employees consisting of polo or dress shirts with the company logo.[/font]
[font=Calibri]Many companies now are requiring uniforms be worn by theiremployees. This goes a long way in eliminating workplace dress code issues. In addition the UniFirst Corporation did a survey to determine the top 10 reasons companies require uniforms. The results in order were:[/font]
[font=Calibri]1.[/font][font=Times New Roman]      
[/font][font=Calibri]Create an attractive business image[/font]
[font=Calibri]2.[/font][font=Times New Roman]      
[/font][font=Calibri]Promote brand[/font]
[font=Calibri]3.[/font][font=Times New Roman]      
[/font][font=Calibri]Free advertising[/font]
[font=Calibri]4.[/font][font=Times New Roman]      
[/font][font=Calibri]Protect workers[/font]
[font=Calibri]5.[/font][font=Times New Roman]      
[/font][font=Calibri]Improve security[/font]
[font=Calibri]6.[/font][font=Times New Roman]      
[/font][font=Calibri]Prevent product cross contamination[/font]
[font=Calibri]7.[/font][font=Times New Roman]      
[/font][font=Calibri]Create team spirit[/font]
[font=Calibri]8.[/font][font=Times New Roman]      
[/font][font=Calibri]Employee benefit[/font]
[font=Calibri]9.[/font][font=Times New Roman]      
[/font][font=Calibri]Improve customer relationships[/font]
[font=Calibri]10.[/font][font=Times New Roman]  
[/font][font=Calibri]Promote company pride[/font]
[font=Calibri]http://www.providencejournal.com/business/press-releases/20130321-top-10-benefits-of-employee-uniforms.ece[/font]
[font=Calibri]So the question is “Are uniforms provided by the companytaxable income to the employee?” The IRC code states that an employee uniform and associated maintenance is not taxable if it meets two conditions:[/font]
[font=Calibri]1.[/font][font=Times New Roman]      
[/font][font=Calibri]The uniform is required by the employer.[/font]
[font=Calibri]2.[/font][font=Times New Roman]      
[/font][font=Calibri]The uniform cannot be wearable as street cloths.[/font]
[font=Calibri]There are three traditional avenues employers take whenproviding uniforms. Some companies will acquire the uniform, provide it to the employee and pay for all maintenance. If the uniform meets the two requirements then these costs are not taxable income to the employee.[/font]
[font=Calibri] Some companies electto provide the employee with a fixed monthly amount to allow the employee to purchase their uniforms and pay for the maintenance. Others provide the uniform but pay a fixed monthly amount to pay for the maintenance only. Fixed monthly payments are taxable income to the employee.[/font]
[font=Calibri]Adjustments are now being reported if the “uniform” consistsonly of a polo shirt, even though the polo shirt may have the company logo. If the company does not “require” all employees to wear the “uniform” this can have an impact on the decision. In other words, logo wear to be worn on casual Friday will not qualify.[/font]
[font=Calibri]It is recommended employers be able to show clearly how theuniforms provided are required (and why), and that they are not normally worn outside of the work environment. The company mentioned at the beginning provided logo wear for their employee’s. They then gave the employee’s $25 per month for the maintenance. The IRS ruled that the monthly cash payment was taxable income, reclassified uniform payments are subject to FIT, FICA and FUTA assessment.[/font]
[font=Calibri]If you have questions regarding the taxation of employer providedbenefits contact [/font][font=Calibri]gary@illuminaregroupinc.com[/font][font=Calibri].
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[font=Calibri]IRS CIRCULAR 230 — DISCLOSURE NOTICE: IRS Circular 230regulates written communications
about federal tax matters between tax advisors and their clients. To the extent the preceding correspondence and/or any attachment is a written tax advice communication, it is not a full “covered opinion”. Accordingly, this advice is not intended and cannot be used for the purpose of avoiding penalties that may be imposed by the IRS regarding the transaction or matters discussed herein.[/font]