Add fringe benefits and report imputed pay

Fringe benefits are considered non-cash compensation and taxed as regular wages. These taxable “wages” are called imputed pay. Imputed pay is only added to gross wages for taxability purposes. This means team members will not receive the benefit amount as pay—they receive the benefit in another way. They'll be taxed on its value since it's considered part of compensation.

Learn more about fringe benefits from the IRS.

Examples of imputed pay

Gym memberships and fitness incentives
Personal use of a company car
- Like other imputed pay, company contributions will increase the employee's subject wages for all taxes (except PA state income tax).
Educational assistance (including student loans) and tuition reduction
- For student loan assistance: Up to $5,250 may be paid to employees tax-free if qualifications are met. Review IRS guidance here or speak with an accountant to learn more.
Employee discounts
Employer-provided cell phones
Moving expense reimbursements (Taxability varies by state. Consult your tax professional for how to best handle these.)
Non-statutory stock options

If you do not know whether you need to enter imputed pay in Gusto, work with an accountant to find the correct classification for your situation. Learn more about imputed pay on our blog.

Reimbursing employees for fringe benefits

Employees might receive fringe benefits in different ways. For example, an employer-paid cell phone may be purchased directly by the company. Or, perhaps employees pay out of pocket for gym memberships and you reimburse them.

If you reimburse your team for fringe benefits they've paid for out of pocket, remember that reimbursements (both regular and expense) are not taxed and are not reported as wages. Typically, when you reimburse an employee for a fringe benefit, you should also set up that fringe benefit in Gusto so their compensation is recorded accurately.

Record fringe benefits (imputed pay) on payroll

If your employees have received a fringe benefit, here's how to record it on payroll so it's properly reported:

Go to the Benefits section.
Scroll down to "Custom Benefits."
Select your benefit type or click Show more custom benefits.
Add a name for the benefit. This will appear on employee paystubs.
For "Employee Deduction Per Pay Period," enter $0.
Under "Company Contribution Per Pay Period," enter a default amount with the value of the non-cash item.
Click Save & Continue.
Select which employees should have this benefit.
Click Save.
If needed, modify the benefit details for each employee.

The next time you run payroll, we'll record the company contribution for imputed pay and tax the amount as part of the employee's gross wages. It will not be paid out to the employee since this benefit was already compensated in another form.

Report fringe benefits (imputed pay) on payroll retroactively

To make your tax filings as accurate as possible, we recommend you add all fringe benefits (like gym stipends or memberships, relocation reimbursements, company car, etc.) to Gusto before we file your quarterly or annual taxes.

To add missing fringe benefits (also known as imputed pay) and record them for the year, follow these steps:

First, set up the fringe benefit following the instructions in the dropdown above.
Then, record these benefits by running an off-cycle payroll with the "Net Earnings" field set to $0. Make sure the check date is on or before the last day of the year (December 31) in order to have the amounts reflected in your filings and W-2s for the year.

After you run an off-cycle payroll with the benefit set up, we’ll debit your company's account for any associated payroll taxes. This debit will include employer taxes as well as employee taxes; as a result, your employee(s) will owe you for their portion of the taxes we debit.

To recoup these funds from the employee(s):

Set up a one-time post-tax deduction for that employee to withhold that amount from their wages. This will return that amount to the company bank account.

View imputed pay on a paystub

Once you add a fringe benefit to Gusto, the benefit amount appears on employee paystubs after you run payroll.

Imputed pay is listed in three places on paystubs:

As a line item in "Employee Earnings."
- This amount is included with the rest of an employee's gross earnings. Taxes are calculated with this total amount.
As a line item in "Employer Contributions."
- This shows that the benefit amount was paid by the company.
As a line item under "Summary."
- This amount is deducted after taxes are taken from your employee's total gross earnings.