IRS Says That Employers Can Provide Credit Monitoring And Other Identity Protection Services To Employees Tax-Free

The Internal Revenue Service (IRS) has recently announced that it is expanding the tax treatment dealing with employer provided credit monitoring and other identity protection services to apply even before a breach happens. “Earlier this year, we reported that the Internal Revenue Service clarified that it would not consider the value of credit monitoring and other identity protection services provided by employers to employees in connection with a data breach to be taxable income to the employees.” IRS Announcement 2016-02 is welcome news for employers that want to protect their employees from being affected by a data breach. They will be able to provide these services to their employees without increasing any federal tax liability. The employer and employee will still have to keep state and local tax implications in mind.

See Joseph J. Lazzarotti, Employers Can Provide Credit Monitoring and Other Identity Protection Services to Employees Tax-Free Before a Breach Happens, IRS Says, Workplace Privacy, Data Management & Security Report, December 30, 2015.