In the harsh reality of the identity fraud era, employers are taking steps to protect the safety of private information. In a welcome bit of relief and clarity, the IRS has issued Announcement 2015-22 stating it will "not assert that an individual whose personal information may have been compromised in a data breach must include in gross income the value of the identity protection services provided by the organization that experienced the data breach." Further, employers providing identity protection services will not be required to report the value of those services on information returns such as W-2s and 1099s.
Of course, there are exceptions. For example, identity protection services provided for reasons other than a data breach are not covered under the announcement. Additionally, cash received in lieu of these services continues to be taxable income. The IRS has requested comments from interested parties on the first exception by October 13, 2015. It will consider issuing additional guidance for those situations depending on the responses.
Questions? Contact your Berdon advisor. Berdon LLP. New York accountants