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Read About Personal Use of Employer Provided Vehicles


Taxing and Reporting the Personal Use of 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 of employer provided vehicles 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 of employer provided vehicle. (7,800 mi x $0.36/mi = $2,808.00)
  • Subtract expenses paid by employee to calculate total value of personal use of employer provided vehicle. ($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

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.

 

Robert W. Ditmer, CPP, is the owner of RWD Financial Support Service, located in Raleigh, North Carolina. Mr. Ditmer provides support and consulting services in the areas of bookkeeping, accounting, payroll and human resources. With over 25 years of experience Mr. Ditmer has worked in a wide variety of industries, and he worked as a Controller in four different businesses including a land planning/landscape architecture firm in Philadelphia, PA, a private dining and catering facility in Wilmington, DE, an IT support company in Glastonbury, CT, and a commercial construction management firm in Columbia, MD. Mr. Ditmer has also spoken at conferences and provided training on various issues, and he has written a number of articles in the field of payroll and payroll taxation. He is a member of the American Institute of Professional Bookkeepers and the American Payroll Association, and qualified as a Certified Payroll Professional in 2000. He can be reached at rwdfinancial@yahoo.comThis e-mail address is being protected from spambots. You need JavaScript enabled to view it


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FYI...  All our calculators are able to address Supplemental withholding rates. Note that Supplemental is an option in the Federal Filing Status field.