Year-end tip: IRS special accounting rule lets employers treat Nov–Dec fringe benefits as paid next year
Key points
- Taxable noncash fringe benefits provided in November and December can be treated as paid the following year
- Does not apply to cash wages, real estate or investment property such as stock
- No IRS notification required, but employees must be notified, and not earlier than the last regular payroll of the year
The IRS optional special accounting rule lets employers treat taxable noncash fringe benefits provided in November and December (or a shorter period within them) as paid in the following year. For example, personal use of a company vehicle in late 2026 can be counted in 2027 wages. The rule cannot be used for cash wages, real estate or investment property such as stock. Employers choose which benefits to cover, but must apply the chosen benefit to all employees receiving it. They need not notify the IRS, but must notify employees when issuing the W-2 or around that time, and no earlier than the employee's last regular payroll of the year. For reference only; not legal advice.
What employers should do
- Review taxable noncash fringe benefits provided in November and December, such as personal use of company vehicles, and decide whether to use this special accounting rule
- If used, apply it to all employees receiving each chosen benefit and notify employees when issuing W-2s or around that time
Policy details
- Jurisdiction
- Federal
- Status
- In effect
- Effective date
- —
- Employers covered
- U.S. employers providing taxable noncash fringe benefits
- Official source
- View official source ↗
Original report: View source ↗AI-assisted brief; may contain inaccuracies. Rely on the original reports and official documents. For information only; not legal, immigration or insurance advice.