How are fringe benefits treated for Federal tax purposes?
It depends upon the fringe benefit. Generally, all fringe benefits are considered compensation and taxable at their respective fair market value unless they are specifically deemed to have preferential treatment by the IRS. In other words, unless the IRS has specifically identified it as preferential, it is considered compensation and subject to tax.
Example: Section 125 cafeteria plans used to purchase "qualified" benefits are not subject to federal income tax or FICA (social security and medicare).
Example: 401(k) deferrals are not subject to federal income tax, but are considered taxable wages for the purposes of social security and medicare.