Imputed Income

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Employers and HR teams have many responsibilities when it comes to reports made to the Internal Revenue Service (IRS). When you think about what needs to be filed, top of mind will be salary and wages. But that’s not all, don’t forget to include imputed income. What is it? Let’s find out in this article. 

What is “imputed income”?

Imputed income refers to the value of all the non-monetary compensation given to employees. Imputed income is typically in the form of fringe benefits. The value is added on top of an employee’s gross wages so that employers can withhold taxes accurately.

You might be wondering, why will fringe benefits be taxed? Imputed income is not included in an employee’s net income calculation, but it is still income because it has value. Let’s use a company car as an example. It is a fringe benefit given to employees of Company A. While the employees do not have to pay for the company car per se, they do have to be taxed on the company car’s value. 

While imputed income is generally taxed, there are some types of imputed income that are considered exempt from taxes. Common examples are meals and life insurance.

What are some examples of imputed income? 

Employers are free to be creative in choosing what fringe benefits they want to offer their employees. These are taxed depending on their value. Here are some common examples of imputed income:

What are some examples of benefits that are excluded from Imputed Income?

Some benefits are excluded from imputed income if they are below a certain threshold. The following are some examples: 

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