The Special Accounting Rule — And Other Year-end Reminders
Under The Special Accounting rule, an employer may elect to treat taxable noncash fringe benefits, such as personal use of company cars provided any time in November or December 2005, as being paid in 2006. If you make this election for tax year 2005, you must notify affected employees no later than Jan. 31, 2006. Here are some other year-end reminders.

• Unpaid salaries to related parties. Cannot be deducted until the year in which they are paid.
  
  
• Nonforfeitable vacation pay. Deductible in the year earned—if paid by the close of the tax year or within 2-5 months of the close of the year.
  
  
• Employer contributions to employee SEPs are not subject to FITW or FICA. Exception: If you offer the option of taking cash or a contribution, all employer SEP contributions are wages subject to FIT, FITW, FICA, and FUTA, regardless of whether any employee actually takes the cash.
  
  
• Employer-provided vehicles. If you elect to report 100% of employee use as wages, then total business and personal miles are wages subject to FIT, FITW, FICA, and FUTA. Include the amount in Box 1 and either in Box 14 or in a separate statement with the information.
  
  
• Dependent care benefits. Under a qualified §125 plan, the value of employer onsite day care facilities, cash or employee pretax contributions of up to $5,000 a year is exempt from FIT, FITW, FICA, and FUTA. Report total 2005 benefits in Box 10 and amounts over $5,000 in Boxes 1, 3 and 5. [IRC §129 (a)(2)(AA); §129(b)]