Personal Use of Research Foundation Vehicle Policy

Purpose

The purpose of this document is to provide guidance on taxation and reporting of personal use of a Research Foundation (RF) owned or leased vehicle. This includes calculating and reporting the taxable value of the personal use of the vehicle to the individual who is receiving benefit.

Background

Taxation of Personal Use

The RF leases and/or owns vehicles that benefit the business activities of the project for which they were acquired. In some cases, the individual assigned for business use of the vehicle may also use the vehicle for personal reasons. The cost attributed to the personal use of the vehicle may be taxable to the person depending on the vehicle and the situation.

Business Use

The business use of company-provided vehicles is considered by the IRS a business expense and is therefore not required to be reported on a tax statement. However, business use should be documented to meet record keeping requirements.

Documenting and Reporting

When it is determined that the personal use of the vehicle is taxable to the individual, the items outlined below regarding documenting and reporting the use must be followed.

Complying with IRS Requirements

To comply with IRS regulations in regards to personal use of RF provided vehicles, operating locations have the following options:

Tracking and Reporting Personal Use - Responsibilities

Operating Locations

Operating locations that authorize the use of RF vehicles for personal purposes must establish a process to track and identify, over the course of a calendar year, the following costs:

Individual Assigned to RF Vehicle

It is the responsibility of the individual assigned to the vehicle to complete the RF form: Taxable Value of Personal Use of an RF Provided Vehicle (pdf). The completed form must then be returned to the operating location office that is responsible for payroll matters no less than quarterly but may be done on a monthly basis

Important! All information regarding the use of the vehicle for the calendar year is due by December 15. This requires an estimation of mileage for the final 15 days of the year.

Calculating the Value of Personal Use

There are two possible methods established by the IRS that the RF can use when calculating the taxable value of a company-provided vehicle: Annual-Lease-Value (ALV) or Fixed-Rate-Per Mile. In order to determine the method to use, you must first determine if the fair market value of the vehicle when first made available to the individual exceeds the limits of the IRS Cents-Per-Mile Value Limit (see IRS Publication 15b for this limit).

The fair market value of a vehicle is determined by the purchase or lease cost. In the case of a purchase, the fair market value would be the sticker price or final invoice price including sales tax, title and other attributable expenses. In the case of a lease, the fair market value would be, the manufacturer's suggested retail price, including sales tax, title and other attributable expenses minus 8%. A vehicle's value may also be obtained from a nationally recognized pricing source such as the NADA Blue Book.

Annual Lease Value Calculation

For vehicles that exceed the IRS Cents-Per-Mile Value Limit, the taxable value is calculated as follows:

  1. Determine the fair market value of the vehicle as of the first day it was made available to the individual for personal use.
  2. Based on the fair market value, find the ALV in the IRS Annual-Lease-Value Conversion Table (See IRS Publication 15b for this table).
  3. Adjust the ALV by the days the vehicle was available to the employee (i.e. if it was not January 1 then the ALV should be adjusted by days
    available/365) Important! The AVL should not be adjusted for an employee's leave as the vehicle is still available to them for use during
    that time.
  4. Multiply the ALV by the percent of business use for the person using the vehicle. This percentage is determined by the amount of total
    miles driven compared to the personal miles recorded.

    Example: A vehicle, to be used exclusively by an individual, is purchased by the Research Foundation of SUNY for $25,000, in September 2004. The ALV of vehicle is $6,850, the adjusted ALV for the year is $2,289.59 (122 days available/365 *6,850). The individual records mileage throughout the year as total miles driven = 10,000 and use miles = 4,000. The percentage of personal use miles is therefore 40%. This percentage is then multiplied by the adjusted ALV to arrive at $915.84 as the taxable value of the car. If the car had been available the full year the 40% of personal use would be applied to the full $6,850 to arrive at $2,740 as the taxable value of the car.

    Note: If the employee was reimbursed for gas for the entire use of the car, not just the business use, then 5.5 cents would be applied to the number of personal miles driven and that amount would also be added to the taxable value of the car.

Fixed-Rate-Per-Mile Calculation

For vehicles that do not exceed the IRS Cents-Per-Mile Value Limit, the taxable value is calculated as follows:

Effect on Income and Withholding

For RF employees, the taxable value of the vehicle provided will be recorded as imputed income to the individual's earnings in the last pay period of the year. Therefore, the employee’s gross income will be increased without effecting net pay. The value will appear as "Company Car" on the check stub and/or direct deposit slip and will be included in the year-to-date (YTD) gross income.

Important: The taxable value of personal use of a company-provided vehicle is subject to both Income and Social Security/Medicare taxes and is reportable as income on the W-2 statement. The RF will only withhold Social Security and Medicare taxes and not Federal or State income taxes.

Entry in Oracle

The earnings element used to record the value in the Oracle business system is Company Car. This earnings element should be entered in the employee's record prior to the last pay period of the year. Imputed income entered to this element will automatically have Social Security and Medicare taxes withheld but not federal or state income.

Notifying the Employee

In accordance with IRS regulations, the Human Resources or Accounts Payable department at your operating location must notify any employee using a company-provided vehicle in writing 30 days from receiving the car and/or January 31 of each tax year that no Income Tax will be withheld on the taxable value of the vehicle. It is also suggested the method that will be used to calculate the taxable value be outlined as well. The following standard letters can be used to notify the employee:

Change History

 

 

Feedback
Was this document clear and easy to follow? Please send your feedback to webfeedback@rfsuny.org.

Copyright © 2012 The Research Foundation for The State University of New York