FRINGE BENEFITS AND 2% SHAREHOLDERS OF S CORPORATIONS

S corporations may pay fringe benefits for the benefit of its shareholders, as well as its other employees. However, special rules apply as to whether these benefits will be taxable to shareholders who receive them if those shareholders own 2% or more of the stock of the corporation.

Not all fringe benefits will be taxable to the shareholders. For a quick review of what expenses can and cannot be received free of income tax, click here to see a summary chart.