Taxable Uniform Process
Ohio University has a campus-wide process that creates consistency among departments when determining if uniforms or clothing provided to an employee is a taxable benefit.
A taxable benefit can exist when an employee is issued clothing or uniforms under regulations §62(c) of the Internal Revenue Code. It is necessary for each department to determine if the item issued constitutes a taxable benefit to the employee. Publication 15 of the Internal Revenue Service outlines the requirements that determine if clothing is excludable from an employee’s wages:
1. The item is specifically required to be worn as a condition of employment.
2. The item is not worn or adaptable to general usage as ordinary clothing.
A uniform issued to a firefighter qualifies for the exclusion since it is required to be worn and not adaptable for general usage. However, a detective’s suit jacket or other related clothing, since they are suitable for everyday wear, do not qualify for the exemption and is taxable to the employee at the fair market value (FMV) of the item. FMV is the price an item would sell for on the open market. The FMV can differ from the amount being paid for the item.
- A uniform is purchased by a department and issued to an employee.
- Departments will use the decision tree form for guidance when determining the taxability of uniforms.
- If the uniform is taxable:
a. The department will complete the Record of Taxable Uniforms form for the employee/employees.
b. CFAO or their delegate will forward a copy of the Record of Taxable Uniform form to the employment tax accountant, email@example.com
- If the uniform qualifies for the exemption the department must post the purchase into BobcatBUY or Concur using natural account 264000 with the following information:
a. A description of the item
b. The purpose of the item
c. The fair market value of the item
d. The quantity purchased
e. The number of employees receiving the item
f. Departments should retain this information from steps 4 a through e in their files for no less than seven years.
Employees should contact their department with questions in regards to what item is being taxed and the fair market value of the item. The Employee Service Center will answer questions in regards to the additional tax being withheld.
Departments should contact the Employment Tax Accountant with any questions or concerns at firstname.lastname@example.org or 740-597-1721.
FAQs: Taxability of Uniforms Provided by Ohio University
What is considered a uniform?
A uniform is any article of clothing, shoes, or accessories provided by the university that can be worn while working to aid in the protection of an employee and/or to offer a professional visual image.
Are uniforms a taxable fringe-benefit?
It depends. The IRS exempts uniforms from being taxable if the item meets two tests:
The item is required to be worn while performing a job.
The item is not adaptable to wear outside of the job for general usage.
How do I know if the clothing issued is required to be worn?
Your department will be able to inform you if any uniform provided is required to be worn.
How do I know if the clothing issued meets the general usage test for exclusion?
The general usage test is performed on a case by case basis. An example is a police officer or firefighter’s uniform; it is not adaptable for general usage. However, a detective's suit jacket and related clothing, since they are suitable for everyday wear, do not qualify as a taxable benefit and are taxable to the employee.
Another example is company logo polo. This is a taxable benefit since the shirt is suitable for everyday wear.
Who should I ask about the taxability of clothing provided?
Your department will be able to answer if uniforms or clothing issued will be treated as a taxable fringe benefit.
Who should I ask about the additional amount of tax withheld?
The Employee Service Center will be able to answer any questions about the additional tax withheld.
How will I be taxed on the uniforms?
The fair market value of the uniforms will be added as income to your next available payroll check. This will allow for the appropriate taxes to be withheld in accordance with IRS regulations.
What if I receive a uniform allowance through my paycheck and am not issued the uniform directly?
Uniform allowances are always taxable when paid through your payroll check. There is no exemption even if the money is spent on items that meet the excludable test requirements.
What are some examples of uniforms or clothing considered taxable?
Examples of taxable uniforms include shirts (logo or plain polo, tee, button down), pants, shorts, athletic gear, shoes, boots, jackets, hats, etc.
What are some examples of uniforms or clothing considered non-taxable?
Examples of non-taxable uniforms include safety gloves, safety glasses, active duty police uniforms, cleats, and protective vests.