California Department of Transportation
 
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Clark Paulsen, Division Chief

Tax Withholding and Reporting Requirements

References: Department of Human Resources (CalHR) Personnel Management Letter 2004-15, State Controllerís Office Payroll Letter 12-022 and 14-021. State Controller's Office Payroll Procedure Manual (PPM) Section N120

Fringe Benefits and Employee Business Expenses

Fringe Benefits (FB) and Employee Business Expenses (EBE) are defined as something additional to regular pay, which an employee receives from an employer. Types include cash, cash equivalents, goods, property and services and most often represent taxable, reportable income.

Departments must comply with reporting and withholding requirements cited in the State Controller's Office Payroll Procedures Manual, Section N120.

Tax Withholding Rates

Federal, 25% Medicare, 1.45% (if applicable)
State, 6.6% State Disability (SDI), 1.0% (if applicable); 0.9% Effective January 1, 2015
Social Security, 6.2%

All withholding adjustments will appear in a regular payroll warrant with the exception of some moving and relocation payments. Federal and State tax for moving and relocation will be withheld from the travel expense claim (TEC) reimbursement check unless otherwise noted. Amounts for Social Security, Medicare and State Disability Insurance will be withheld from a future payroll warrant.

Employee Wage and Tax Statement, Form W-2

All reportable FB and EBE payments issued to employees in a calendar year must be reflected on the Wage and Tax Statement, Form W-2.

Federal and State taxes will not be withheld from payroll for payments reported between November 10th and December 31st due to year-end processing deadlines. However, payments during this period will appear as income on the employee's Form W-2.

Payments issued in the month of December will result in the issuance of a corrected Wage and Tax Statement (Form W-2C). All amounts for applicable Social Security, Medicare, and SDI will be withheld from a future payroll warrant.

FB/EBE Reportable Payments

The Division of Accounting, Travel Policy Section, is responsible for reporting the following FB/EBEs:

Bicycle Mileage Moving and Relocation
Call Back Mileage Outstanding Travel Advances
Employee Occupied State Housing Overtime Meals
Long-Term Travel, Indefinite Assignments Personal Use of State-Owned and Leased Vehicles
Meals and Lodging, 50-Mile Limit Exceptions Private Aircraft Mileage
Meals Less Than 24 Hours  

 

Bicycle Mileage

Reimbursement for business use of an employee-owned bicycle is reportable and taxable income.

Call Back Mileage

Reimbursement for personal commute mileage due to a call back to the office after completing a normal work shift and working overtime on a normal day off is reportable and taxable income.

Employee Occupied State Housing

The difference between the Fair Market Value (FMV) of employer housing and employee paid rent (when lower than FMV) is reportable/taxable income. Employer-owned housing units include houses, apartments, dormitories, mobile homes, trailers, mobile home pads, trailer spaces, etc.

Long-Term Travel, Indefinite Assignments

Reimbursement or direct payment to third parties for meals, lodging, mileage, etc. for indefinite long-term travel assignments (assignments over 365 days) is reportable and taxable income.

  • If the assignment is expected to last over 365 days, the benefits are reportable and taxable regardless if it is later determined that the assignment will be less than 365 days.

  • If the initial assignment is 365 days or less and then is later determined to last over 365 days, reimbursements become immediately reportable and taxable.

For more information, see Taxation for Long-Term Assignments.

Meals and Lodging, 50-Mile Limit Exceptions

Reimbursements for meal and lodging expenses incurred less than 50 miles from either home or headquarters are reportable and taxable income.

Meals Less Than 24 Hours

Reimbursement for meals for travel of 24 hours or less without an overnight stay is reportable and taxable income.

Moving and Relocation

The following moving and relocation payments are always considered reportable and taxable income:

  • Lease settlements.
  • Mileage reimbursements exceeding the Federal Standard Mileage Rate (FSMR).
  • Per Diem (lodging, meals, and incidentals).
  • Sale of the old residence.
  • Storage over 30 consecutive days after moving out of residence (not including storage-in-transit).

The following moving and relocation expenses are non-taxable income when time and distance tests are met:

  • The costs of moving the employee's household goods and personal effects from the employee's former residence to the new residence.

Outstanding Travel Advances

Employees must return excess amounts within 120 days or an immediate tax liability will be reportable and taxable for those amounts. If an employee substantiates and returns excess advances after the employer has treated amounts as wages, the employer is not required to return any withholding or treat amounts as non-taxable.

Overtime Meals

Reimbursement for overtime meals, including arduous meals, is reportable and taxable income.

Personal Use of State-Owned and Leased Vehicles

The value of personal use of a state-owned or leased vehicle (PUSV) is reportable and taxable income. Personal use includes miscellaneous non-business trips and daily work commutes.

Employers must apply facts and circumstances on a case-by-case basis to determine taxable personal use. For PUSV reporting policy, see PUSV Guidelines.

Private Aircraft Mileage

Reimbursement for business use of an employee-owned aircraft is reportable and taxable income.

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