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.
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.
For further information on when the personal use of an RF owned or leased vehicle is taxable, refer to IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits or call Central Office, Department of Corporate Payroll and Reporting.
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.
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.
To comply with IRS regulations in regards to personal use of RF provided vehicles, operating locations have the following options:
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:
Operating locations must maintain adequate records or sufficient evidence to support any business use of the vehicle. Vehicle use should be documented using the RF form: Taxable Value of Personal Use of an RF Provided Vehicle (pdf), or another method that captures the same information.
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.
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.
For vehicles that exceed the IRS Cents-Per-Mile Value Limit, the taxable value is calculated as follows:
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.
For vehicles that do not exceed the IRS Cents-Per-Mile Value Limit, the taxable value is calculated as follows:
Example: A person records the total personal use miles driven throughout the year to be 6,000. The Federal Standard Mileage Rate is 44.5 cents per mile. The person supplies his or her own fuel so the rate is adjusted by 5.5 cents to 39 cents per mile. Therefore, the taxable value of the car is $2,340.
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.
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.
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:
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