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When should I use non-taxable allowances in Zenefits Payroll?

Use the default Non-taxable allowances earnings type in Zenefits Payroll to provide employees a non-taxable amount as allowance for cell phones or transportation used for business purposes.

Examples of Non-taxable Allowances

In general, non-taxable allowances should be used only for expenses and services incurred while performing business activities. and are paid to employees in advance of the expense.

  • Mileage or transportation allowances for business travel
  • Housing allowances for clergy
  • Cell phones, computers, and internet services for business activities
  • Meal allowances for travel
  • Airfare

Is this Allowance Taxable or Non-taxable?

Allowances are non-taxable to the extent that they are used solely to pay for expenses incurred as part of normal business.

  • If an allowance paid to an employee exceeds the actual amount of the expense, the excess is considered taxable income.
  • Car allowances (e.g., a car provided to an employee, or an amount provided to the employee for payment towards the expense of the car) are considered taxable fringe benefits, since the employee could feasibly use the car for personal purposes. Here's how to create a taxable vehicle allowance item using the default Additional Earnings category.
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