The IRS has released FAQs on the tax treatment of work-life referral services provided to employees. The FAQs address the tax implications for both employers and employees, including the treatment of referral fees and the exclusion of certain services from taxable income. Employers should review these FAQs to ensure compliance with tax laws and to properly report these benefits on employee W-2 forms.
The IRS today issued “frequently asked questions” (FAQs) in Fact Sheet 2024-13 related to the tax treatment of work-life referral services provided to employees under an employer’s work-life referral program (WLR program) and provide that generally such programs are excluded from employee income and employment tax withholding as a de minimis fringe benefit.
As described in the related IRS release—IR-2024-110 (April 16, 2024)—a WLR program is an employer-funded fringe benefit that provides work-life referral services (i.e., informational and referral consultations that assist employees with identifying, contacting, and negotiating with life-management resources for solutions to personal, work, or family challenges) to eligible employees. A WLR program may be offered under an Employee Assistance Program. Common WLR services include:
These programs are used infrequently by employees, even if offered to a large population of employees. These programs are usually operated by a third party to provide anonymity to employees related to sensitive topics and employers do not need to establish systems to handle protected information.
The FAQs clarify that under certain circumstances, the value of work-life referral services provided to employees through a work-life referral program can be excluded from income and employment taxes as a de minimis fringe benefits.
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