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September 8, 2015

Taxation of Employer-provided Identity Protection Services (article)

Unless one has been living in a vacuum, it does not come as a surprise that identity theft is an ever-growing plague.  Employers are certainly not immune to being unwitting targets.  To this end, the IRS issued Announcement 2015-22 addressing the tax status of employer provided identity protection services.   According to the Announcement, if identity protection services are provided to employees by their employer who has experienced a data breach, the amount of such protection services would not be included in the employees’ gross income or wages.  However, if credit protection services are provided unrelated to a breach, or if cash is provided to employees to purchase their own identity protection services unrelated to a breach, then such amounts would be taxable.

The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.

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