This Month Only! >> $20 off and a FREE SHRM tote with your membership and code TOTE2018!
Sign up for free email newsletters and get more SHRM content delivered to your inbox.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Build competencies, establish credibility and advance your career—while earning PDCs—at SHRM Seminars in 12 cities across the U.S. this spring.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
More employers likely to provide data-breach monitoring and related services to employees
Employers can now provide an additional workplace benefit using pretax dollars.
The IRS on Dec. 30, 2015, released
Federal Tax Treatment of Identity Protection Services, which allows preferential tax treatment for employer-provided identity theft benefits regardless of whether the employer has experienced a data breach.
In August 2015, the IRS had released
Federal Tax Treatment of Identity Protection Services Provided to Data Breach Victims, which dealt specifically with employees and others whose personal information may have been compromised in a data breach. This announcement allowed those affected by a breach to exclude from their taxable gross income the value of identity protection services provided to them by the breached organization.
Announcement 2016-02 now extends the prior guidance to include identity protection services provided to employees despite the absence of a data breach, allowing the value of employer-provided ID protection benefits to be excluded from an employee’s gross income and wages. Likewise, the value of these services does not need to be reported on an employee’s Form W-2 or on a Form 1099-MISC.
The preferential tax treatment does not apply to cash provided to employees in lieu of identity protection services, or to proceeds received under an identity theft insurance policy.
“This is welcomed news for employers looking for ways to help their employees avoid being affected by a data breach and [mitigate] the effects should employees become victims of a breach,” said Joseph J. Lazzarotti, an attorney shareholder in the Morristown, N.J., office of Jackson Lewis. “The employer can provide the services without increasing its federal payroll taxes, and employees can receive the services without incurring any additional federal tax liability.” Employers and employees will still have to consider any potential state and local tax implications, Lazzarotti noted.
“As a result of this action, and because of how prevalent data breaches have become, it is likely that more employers will be looking to provide data-breach monitoring and related services to their employees,” Lazzarotti pointed out. “While these services would not constitute benefits covered under the Employee Retirement Income Security Act, as with other employee benefits, employers will want to carefully select the vendors that will provide the services, and take other steps to incorporate this into their overall benefit offerings.”
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Follow me on Twitter.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Please sign in as a SHRM member before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Join SHRM's exclusive peer-to-peer social network
SHRM’s HR Vendor Directory contains over 10,000 companies