IRS 1.132.5 Compliance

In today’s complex and ever-evolving security landscape, organizations face a myriad of regulatory requirements to protect their assets, data, and operations. IRS Section 1.132.5 compliance specifically addresses the provision of security services (such as personal bodyguards, home security systems, or secure transportation) to an employee.

The value of  these security services can be excluded from the employee’s taxable income if the services are provided in response to a bona fide business-oriented security concern. This applies when an employer reasonably believes that the employee faces an elevated risk due to their job or public exposure. To qualify for the tax exclusion, the employer must demonstrate that the employee is subject to a legitimate security risk due to their position within the company. This often applies to high-level executives, public figures, or employees operating in dangerous environments.

At ETS Risk Management, we believe that understanding and implementing IRS 1.132.5 compliance is not just about meeting regulatory obligations—it’s about safeguarding your organization’s most valuable assets and ensuring a secure, compliant, and efficient operation.

The IRS 1.132.5 assessment – US Code title 26, Section 132 designates certain fringe benefits as necessary to the safety of employees, partners, and directors. It allows for Corporations to have an independent, external assessment to assess the current situation, to see if security-related fringe benefits can be justified.

The benefit of IRS 132.5 applies to Corporate Security, if an overall security program is deemed to exist in situations where there is a bonafide business-oriented security concern.

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For companies providing executive protection, secure transportation, or similar security services for their employees, it’s crucial to ensure that these benefits are structured in a way that qualifies under IRS 1.132-5(f) to exclude the value of the service from the employee’s income. A security study and comprehensive risk assessment is required to justify that the employee’s personal security is tied to a bona fide business concern.

One of the key services we offer at ETS Risk Management is comprehensive security assessments, that include evaluating an organization’s compliance with IRS regulations, including IRS 1.132.5.

As an unbiased, independent third-party consulting firm, ETS satisfies all of the IRS requirements for Section 1.132.5 assessments.

Contact us to further discuss your requirements and find out how we can assist you.