How work uniforms are paid for and reported for tax purposes has been a tricky issue for decades. The continual evolution of IRS rules only makes a confusing situation worse. That doesn’t even account for overlapping rules from other agencies, like the Department of Labor.
With the new tax year upon us, now might be a good time to review some of the most important aspects of the federal government’s work uniform rules. What is discussed in this post only serves as a basic guideline. For more in-depth information, you should probably seek the advice of a licensed accountant or attorney.
Uniforms at the Employer’s Expense
There are circumstances under which employers are required to either furnish uniforms or reimburse employees for purchasing them. As a general rule, these are uniforms that are required primarily for the employer’s benefit. Here are two examples:
- Branded Clothing – Branded clothing generally does not benefit employees. It is designed to sell the employer’s brand via logos, color schemes, trademark images, etc. The more specific the branding, the greater the employer’s burden.
- PPG – Personal protective gear (PPG) mandated by either the employer or government statute must be covered. Regulations allow employers to include such expenses against their annual revenues for tax purposes.
In cases in which employers are required to furnish or reimburse for uniforms, they must also cover the cost of replacing worn out or lost garments. Any special care uniforms might require, including professional laundering, is to be covered by the employer.
Uniforms at the Employees Expense
Likewise, there are circumstances under which employers do not have to furnish uniforms or reimburse employees for them. In most cases, these are general uniforms that can double as streetwear outside of work. Technically, such workwear is only classified as a uniform under the most liberal understanding of the term. Nonetheless, here are some examples:
- Non-Specific Clothing – A company might have a business casual uniform. Employees are free to wear whatever they want within the definition of business casual. Because such clothing is non-specific and it can be worn outside of the workplace, employers don’t have to cover it.
- Specific Streetwear – Likewise, a company could require a specific type of streetwear – like a restaurant server’s black pants and white shirt, for example. Though specific, the garments can be worn outside of work. Employers are not required to cover them.
It should be noted that there is no requirement for employers to cover the cost of home laundering these types of uniforms either. It all boils down to the fact that the uniforms do not benefit the employer exclusively. Employees benefit from the uniforms by wearing them as street clothes.
Uniform Rental Services
Alsco, a Salt Lake City-based uniform rental company, suggests there is one way to avoid all the questions about employer-covered uniforms: renting uniforms on behalf of workers. Uniform rental is considered a legitimate business expense regardless of the specificity of the uniforms in question.
Uniform rental benefits the employer via branded uniforms that support the company’s public image. Renting also gives companies access to high-quality garments without the upfront investment of direct purchase.
Renting uniforms benefits employees as well. They do not have to wear their own clothes to work which, in some cases, means extending the life of their clothes. They also do not have to invest time and money in home laundering. Rental providers handle all the laundering for them.
The tricky issue of employee uniform reimbursements continues with no end in sight. The easiest way around it is to go with uniform rental instead.