In short: We can't give any tax advice 🤦... Not only are we not licensed to do so, but the laws and rules vary by country, state, county, province, town, company, employee and so much more that we wouldn't have the resources to tell you exactly what to do.
While some companies assign the amount used on Zestful as taxable income, others do not. While some companies pay these taxes on behalf of their employees, others simply pass any tax responsibility to the employee.
Most companies report Zestful spending as taxable income
Many of our customers treat Zestful as a fringe benefit, which falls under specific tax rules with the IRS. This means that $100 in Zestful is the same (from a tax perspective for both the company and employee) as giving an employee an additional $100 on their paycheck. We'd argue that you are better off, however, giving this $100 in Zestful as it goes directly to products/services your employees love instead of bills, rent, etc.
Be proactive with taxes
What we do well is make it really easy to provide you with the information you need to give to your finance and/or tax team. This includes all the transactions, broken out by team member, made throughout the year (month, quarter and full year).
What many of our customers do is proactively apply an estimate of how much they think an employee will be spending in Zestful throughout the year, and add this to their payroll software to withhold and account for taxes on every paycheck.
For example: If you give your team $100/mo to spend in Zestful (or $1,200 per year), you can tell your payroll system to account for this additional $100 in income that will be given to your employee outside of their paychecks. Your payroll system will then account for this on each paycheck, and withhold the proper taxes for each employee. At the end of the year, however, you can adjust to what the actual amount an employee spent was (as it's unlikely they use the entire $100 each month). This amount will typically be lower than the projected amount ($1,200 for the year), so an employee would receive a tax credit from this instead of owing.
How to Access Company Reports
Accessing this report is super easy, simply:
- Navigate to the "Spending Reports" page.
- Click on the "Export History" button on the top right of the page.
- Done! This report will have everything you need to hand off to your finance and/or tax team
Here's an additional resource on fringe benefits.