VA. Sheriffs’ Association Annual Conference By Wendy Speelman Federal, State & Local Government Specialist 9/16/14

2 Uniform Requirements For uniforms to be nontaxable and not be included in the employee’s wages they must: Be required by employer to be worn Must be in written policy Can’t be optional if they wear them Not be adaptable to every day street wear

3 How Clothing is Purchased Uniform rules applies to: If the employer purchases the clothing If the employee purchases and the employer reimburses the employee If purchased thru a rental company

4 Accountable Plan Allowances paid through non- accountable plan are Taxable If give employee $200 for uniform and they don’t provide substation (receipts) then must include in W-2 Business Connection Return excess in reasonable time

5 Law & Court Cases If clothing suitable for taking the place of regular clothing, include in W-2 IRC 162 & 262 Mella v. Commissioner T.C. Memo Not enough that the employee does not wear the clothing away from work Pevsner v. Commissioner 628 F.2d 467

6 Examples of Non Uniforms Ball Caps T-shirts Socks All shoes unless steel toe (safety) Tactical/BDU pants Polo Shirts Plain belts Shorts Under Armour Gloves - patrolman Sweatshirt Carhart jacket Jeans

Employer-Provided Vehicles Personal Use is taxable & included in wages Includes commuting Business Use is not taxable No record kept then all taxable Exception: qualified non-personal use vehicle (QNPV)

Qualified Non-personal Use Vehicle Must have policy on restricting personal use of the vehicle Commuting is nontaxable to the employee Substantiation and record keeping is not required

Examples of QNPV Clearly marked police and fire vehicles if: The employee is always on call Require to be used for commute The employer must prohibit personal use for travel outside of the officer jurisdiction Readily apparent the vehicle is a public safety vehicle (words or painted insignia)

Examples of QNPV continued Unmarked law enforcement vehicles if: Any personal use must be authorized by the employer and must be incident to law- enforcement functions The employer must be a govt. unit responsible for prevention or investigation of crime Law enforcement officer must be full time, execute warrants, make arrests & carry firearm 10

Not a qualified vehicle

12 Day Meals If the employer reimburses or pays for meals on a day trip then: Include the cost of meal reimbursed to the employee in their payroll as a fringe benefit Subject to Federal Income Tax, Medicare and SS if regular wages are subject to SS and Medicare Revenue Ruling &

Day Meals continued If union contract says to pay for meals then reimburse but include in wages If have policy to pay for meals if traveling out of county it is still taxable and included in wages Must include in payroll the amount of lunch as a noncash item 13

14 Meals at Conferences “Associated With” Meals - Tax-Free not included in wages Meals at conventions Meals at conferences Does not include going to lunch with co- worker (this would be personal & taxable = include in wages)

Behavioral Control - how, when and where to do the work; training Financial Control - significant investment, expenses, opportunity for profit or loss Relationship of the Parties - employee benefits, written contracts Independent Contractor or Employee

Resources Publication determination on status of worker as either an independent contractor or an employee Publication 963 Chapter 3 Revenue Ruling – 20 factors Internal Revenue Code 3401

Supplemental Pay Compensation paid in addition to regular wages Examples: overtime pay, bonus Withhold federal income tax at 25% Or use formula Subject to Medicare and SS if applicable

18 Department of the Treasury Internal Revenue Service