A Time to Remember that Employer-Provider Data Breach Benefits are not Taxable

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Hardly a week goes by without another announcement of a high-profile data security breach.  The list of data breaches impacting high-profile employers and their employees just in 2017 is long.  Protecting our sensitive data is becoming a top priority for us all.  Recognizing this need, employer-provided identity theft protection is one of the fastest growing employer-provided benefits.  Willis Towers Watson found that, while around 35% of employers offered this benefit in 2015, as many as 80% of employers will offer the benefit by 2018.  The fact that employer-provided identity theft protection can be offered by employers as a nontaxable benefit adds to its attraction for employees.  Under IRS Announcement 2016-02, employees need not include the value of this benefit in income and employers are not required to report the value of the benefit on the employees’ Form W-2.  The nontaxable benefit includes identity theft insurance, identity restoration services, credit report and monitoring services and similar services.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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