64 of 75 An employer is paying $250 per employee for transportation benefits. What is the effect to the employee and the employer at both the federal and state level? The employees will receive nontaxable fringe benefits from this, and the employer will get a $250 deduction as a monthly business expense per employee at both the federal and the state levels. The employees will have $250 monthly taxable income, but the employer will have $250 in deduction per month, per employee as a business expense on both the federal and state return. The employees will have nontaxable fringe benefits, and the employer will have $250 monthly per-employee business costs at the state level. On the federal return, the cost of the transportation fringe benefit will be nontaxable. The employees will only have a nontaxable fringe benefit if they substantiate the costs so the employer can deduct them on their own federal and state returns. Next