Payroll-Taxes.com - Employer Provided Vehicles

by Robert W. Ditmer, CPP*

Assumptions:

Vehicle purchase price: $12,500

Total mileage vehicle driven between 11/1/02 to 10/31/03*: 18,500

Total personal usage from mileage logs: 7,800

All gasoline purchased with company credit card

Employee pays for insurance: $1,800 per year

Value to be taxed at supplemental wage tax rate (25%)

Calculation of Employee Cost:

Calculate value of personal use. (7,800 mi x $0.36/mi = $2,808.00)

Subtract expenses paid by employee to calculate total value of personal use. ($2,808.00 - $1,800.00 = $1,008.00)

Calculation of Taxes:

Federal income tax. ($1,008.00 x 25% = $252.00)

Social security tax. ($1, 008.00 x 6.2% = $62.50)

Medicare tax. ($1, 008.00 x 1.45% = $14.62)

Reporting of Fringe Benefit (if taxes withheld from employee’s paycheck):

Add $1, 008.00 to totals in Boxes 1, 3 and 5 of W-2.

Add $252.00 to total in Box 2 of W-2.

Add $62.50 to total in Box 4 of W-2.

Add $14.62 to total in Box 6 of W-2.

Add $1,008.00 to total on Line 1 of Part I of Form 940

*Please note that the employer in this case has chosen to use the special accounting rule for this particular fringe benefit. This enables the employer to include the value of the benefit in the employee’s wages before the end of the tax year so the taxes can be withheld from the employee’s regular pay.
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**Robert W. Ditmer, CPP, is Controller of Parker, Cade & Large, Inc., a commercial real estate development and construction company located in Columbia, Maryland. Mr. Ditmer has worked in five different states and has experience dealing with multi-state taxation involving states with reciprocal agreements and those that do not. He can be reached at robertwditmer@yahoo.com.

Taxing and Reporting the Personal Use of Employer- Provided Vehicles

Taxing and Reporting the Personal Use of
Employer- Provided Vehicles