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Home : Essentials of Payroll : Outplacement Services
Outplacement ServicesOutplacement ServicesAn employer may offer resume assistance, counseling, and other outplacement services to employees it has terminated. The value of these services is not recorded as income for the affected employees, unless the employer receives a substantial business benefit from providing the services and the services would have been reimbursable business expenses to the employees if they had paid for them directly. These rules will usually apply, since an employer can claim a business benefit in the form of good morale of the remaining employees, who can see that terminated employees are being well taken care of. If these rules do not apply, then the employer must withhold taxes on the fair market value of the services. If the services are provided in exchange for severance pay, then the employer must withhold taxes on them. This latter situation arises when employees ask that the services be provided in an attempt to mask the offsetting compensation, so they can avoid paying payroll taxes. 195
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