Tax Alert: Employee’s Cash Rewards for Wellness Programs & Gym Fees Participation Are Taxable

Have you given any cash incentives for your employees to get in shape? You will have to factor it into your tax plan.

According to the IRS Office of Chief Counsel, cash rewards provided to an employee for participating in a wellness program offered by the employer must be included in the employee’s gross income, although a T-shirt and other de minimis fringe benefits can be excluded under IRC Sec. 132(e) .

[The Section 132(e) de minimis exclusion, which applies when it would otherwise be unreasonable or administratively impractical to account for the benefit due to the minimal value, never applies to any cash fringe benefit, however.] Reimbursements or payments of gym membership fees must also be included. The memorandum stipulates that any reward, incentive, or other benefit provided by a medical program that isn’t medical care, as defined under IRC Sec. 213(d) , is included in an employee’s income unless it’s excludible as an employee fringe benefit under IRC Sec. 132 . CCA 201622031.

Have questions about paying tax on your wellness program? Contact us today.

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