Imputed income must be reported on the employee’s Form W-2 for the year in which the benefit was provided. It should be included in Box 1 as part of the total wages, tips, and other compensation. Depending on the type of benefit, it may also appear in other boxes (e.g., Box 10 for dependent care benefits). Employers are obligated to report this income in the same tax year it was granted to ensure IRS compliance.
Late or inaccurate reporting can lead to IRS scrutiny and potential fines. This reporting timeline applies regardless of whether the benefit is offered throughout the year or as a one-time perk. Businesses can streamline this process by leveraging the services of an experienced employer of record like 1EOR. With real-time tracking and tax-ready reporting systems, 1EOR ensures all imputed income is accurately documented, helping clients stay ahead of tax deadlines without manual errors.