Spring is in full swing and so are new IRS provisions for tax-free fringe benefits that can really enhance your enterprise. As a restaurateur, you are much more vulnerable to any changes in the tax code than other small businesses because restaurants are so labor intensive and operate on such thin profit margins. So any tax breaks the IRS throws your way are especially welcome. A savvy accountant who is familiar with your industry can help you make the most of these opportunities.

Fringe benefits cut both ways, benefitting both employers and employees. They can help you attract and retain good workers. Your employees can enjoy personal benefits at little or no tax cost. If the benefits weren't tax free, employees would have to earn more money to cover their cost. As a business owner, the costs of providing these benefits to your employees is deductible. Moreover, you avoid employment taxes that would be due if you simply gave employees additional salary to pay for the benefit directly.

Here are some tax-free fringe benefits -- most of them new for '97 -- for you to consider:

Group Life Insurance
Companies can provide up to $50,000 of coverage on a tax-free basis ($2,000 of coverage for spouses and dependents is also excludable from employees' pay).

Coverage in excess of this amount is taxed to employees using favorable IRS tables that impute income (which is less than would result using the actual cost of coverage).

Long-term-care Insurance
Companies of any size can pay for the cost of long-term-care insurance for employees, their spouses, and dependents. Employees can exclude from income up to $175 a day in 1997 on per diem contracts. The amount the company pays in premiums is tax free to the employee.

Long-term-care insurance need not be offered to terminated employees through COBRA, a federal law that requires companies to permit such employees to continue health insurance coverage for a period of time.

Adoption Aid
Companies can help defray the expenses an employee incurs when adopting children. Employees receiving such assistance are relieved from paying tax on up to $5,000 of adoption expenses per child ($6,000 for a child with special needs who is adopted in the U.S.).

For the assistance to be tax free to the employee, the company's adoption-aid program must be in writing and it must provide aid on a nondiscriminatory basis. That is, the same assistance must be available for any employee who desires it.

Since no more than 5% of the amounts paid under an adoption assistance plan can be provided to "owners" (those owning more than 5% of company stock or more than 5% of the capital or profits in the company) such a plan may not be suitable for your restaurant. Again, a tax specialist can help you determine whether this is a viable benefit for your business.

Child and Dependent-care Assistance

Companies can help employees pay for child or dependent care. Up to $5,000 of such a benefit does not have to be included in income by the employee.

Education-assistance Plans
Companies can help cover the costs of an employee's academic education or vocational training, whether or not it is job-related. Employees are not required to report as income up to $5,250 of such a benefit. This exclusion, which had expired, was reinstated by Congress as of last year.

There is an exception to this benefit, however, in regard to graduate level courses. As of June 30, 1996, if an employer pays for an employee's graduate level course, the payment is not tax free. The IRS considers graduate level courses to be those taken by someone with a bachelor's degree or those taken by someone receiving credit toward a more advanced degree, such as in law, business, medicine, or other advanced academic or professional fields.

In a new development, the IRS recently ruled that tax-free education assistance can be give to a company's former employees. The latter includes those who retired, were laid off, or became disabled.

Like adoption-assistance programs, however, not more than 5% of education assistance can benefit owners. Otherwise the plan will be disqualified as discriminatory.

The provision for educational assistance had expired on December 31, 1994 but was retroactively restored by Congress. The law is set to expire on June 30, 1997, unless Congress again acts to extend it.

Transportation Benefits
Up to $65 of the cost of monthly transit passes for public transportation or van pooling is excludable in 1997. Company-paid parking up to $170 per month also is excludable.

A Note On Leased Employees.
Note, however, that these fringe benefits no longer pertain to leased employees. Prior to January 1, 1997, leased employees were considered employees if they performed services of a type historically performed by employees of the recipient employer. Now, leased employees are no longer considered employees for fringe benefit purposes unless services are performed under the primary direction or control of the recipient employer.

Of course, the smartest way to put fringe benefits and other tax law opportunities to work for you is to consult with an accountant who understands tax law as it pertains to the restaurant industry.