What Is Considered Personal Mileage on a Company Vehicle

If you treat any use of a vehicle by employees as personal use, indicate the total amount of the benefit in boxes 1, 3 and 5. Also report the benefit amount to the employee in box 14 or on a separate statement. The fair market value of a vehicle does not include the fair market value of telephones, fax machines or special equipment added or transported with the vehicle if the presence of such equipment is necessary and attributable to the needs of your business as an employer. However, an employee is required to include in his or her income the value of such devices used for personal purposes or in a business other than your own. The general valuation rule does not take into account mixed use. It is assumed that the vehicle is only used for personal reasons. Since an employee is likely to use the vehicle for both professional and personal reasons, it may be beneficial to use a special evaluation rule. Under the IRS general rules, any use of a company car is considered personal use unless the employee documents the professional use of the car. Personal use of a company car usually results in a taxable salary for the employee. But sorting out the tax amount can be confusing. Below is a general summary of the current Internal Revenue Services (IRS) rules for taxing employees for personal use of a company vehicle.

[1] The organization may charge employees fees for their personal use or simply treat them as taxable income. But it can also be in the company`s interest to reduce costs by limiting the amount of gas an employee can purchase in a given period of time. Since travel amounts are relatively predictable over a period of time, it is possible to calculate where this limit should be. If you have chosen not to withhold federal income tax, you must notify affected employees in writing no later than January 31 of the year in which you make your decision or within 30 days of the employee`s first receipt of the vehicle, whichever is later. If you change your mind about the holdback, you must notify the employees again in writing. As the cost of corporate fleets increases relative to the benefits they provide, some organizations are considering discontinuing to offer a vehicle. Instead, reimbursing employee-owned vehicles could be a more cost-effective approach. In order to take advantage of these three special valuation rules, you and your employees must keep complete and timely reports on the personal use of company vehicles. You can read more about this in the “Recordings” section below. They will include Megan`s salary of $862.50 as the fair market value of using the vehicle provided by the company. The rules establishing commercial use do not apply to qualified vehicles for non-personal use. These are vehicles which, by their nature, are not likely to be used for a quantity exceeding a minimum for personal use.

Examples include a van with driver-only seats or a specialized repair truck. It is also important to pay attention to the personal use of a credit card issued by the company for the purchase of gasoline. It is very difficult to distinguish between personal and professional use when it comes to a tank part, but the same IRS rules apply. In the general valuation rule, fair value is the price the employee would pay to lease the same or comparable vehicle in the same geographic area for the same duration. You cannot use a rate of one hundred per mile unless you can prove that the rental for the vehicle type was available in the same area at the same time. When withholding tax and accounting for personal use of a company vehicle, follow the rules for withholding tax and reporting perquisites in kind. Generally, the term “business vehicle” refers to any car, pickup truck or SUV used by a business to conduct its business. Dump trucks and other vehicles used as equipment are not considered business vehicles; Vehicles are also not rented for temporary tasks, such as airport vans or taxis.

Any purchase of fuel used for personal travel is treated as taxable income by the IRS. Again, billing procedures with accurate mileage recording are required to properly manage the program. For 2020, the standard mileage rate is 57.5¢ per mile. The price includes the cost of maintenance, insurance and fuel. If you don`t provide fuel to your employees, you can reduce the rate by 5.5¢ per mile.