Add fringe benefits and report imputed pay

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

Imputed pay examples

Gym memberships and fitness incentives
Personal use of a company car
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 if 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

If you need to reimburse your team for fringe benefits they've paid out of pocket, just keep in mind that reimbursements (regular, and expense) are not taxed and not reported as wages. Most times, if you're reimbursing an employee for a fringe benefit, you should also set up the fringe benefit in Gusto to make sure compensation is recorded accurately.

Set up fringe benefits (imputed pay) in your account

Imputed pay is considered non-cash compensation that is taxable, also known as fringe benefits. Add imputed pay to your payroll so that it's properly reported.

Go to the Benefits section.
Click Custom Benefits.
Select your benefit type or create a Custom Benefit.
Add a benefit name, which will appear on the employee's paystub.
Next to Employee Deduction Per Pay Period, enter $0.
Next to 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 applicable, 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 sure your tax filings are as accurate as possible, we recommend adding in all fringe benefits (like gym stipends or memberships, relocation reimbursements, company car, etc.) before we file your quarterly or annual taxes.

To add missing fringe benefits (or, "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've set up the benefit for imputed pay, run payroll and see the benefit amount on your employee's paystub. Imputed pay will appear three times:

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