IRS Addresses Tax Treatment of Work-Life Referral Services

On April 13, 2024, the IRS released a set of FAQs concerning the tax treatment of work-life referral (WLR) services that employers may provide to employees. The FAQs establish that WLR services are a de minimis fringe benefit excluded from an employee’s gross income and from the employer’s employment taxes.

The FAQs define WLR services as “informational and referral consultations that assist employees with identifying, contacting, and negotiating with life-management resources for solutions to a personal, work, or family challenge.” WLR services include assistance with completing paperwork and basic administrative tasks associated with finding resources to tackle problems, such as finding childcare, eldercare, or financial advisors. Although WLR services do not provide childcare or other similar services directly, they help employees access those services.  WLR services are sometimes called caregiver or caretaker navigation services.

According to the FAQs, WLR services are considered de minimis. “De minimis” is defined as “any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer's employees) so small as to make accounting for it unreasonable or administratively impracticable.” In circumstances where it would be administratively difficult to determine the frequency with which fringe benefits are provided to each employee, the employer can measure the frequency using the employer-measured frequency standard.

The FAQs apply this definition and frequency standard to WLR services. As a de minimis benefit, WLR services are excluded from an employee’s gross income and from the employer’s employment taxes.

Note that these FAQs are published as general information to taxpayers and tax professionals, and the IRS will not use them to resolve any case involving WLR services. However, if a taxpayer or professional reasonably relies on them in good faith, then the IRS will not impose a penalty that provides a reasonable cause standard for relief, including a negligence penalty or other accuracy-related penalty, to the extent that reliance results in an underpayment of tax. Accordingly, employers should be aware of the tax treatment of WLR services.

Frequently Asked Questions About Work-Life Referral Services »