Company car and W-2

[JG EA]

Check me out here please:

S-Corp shareholder used the company car 70% for business. If we put th 30% of the lease valuation into wages this is Working Condition Benefit and exempt from withholding, FICA and FUTA - correct?

(Gas is paid for with personal money when doing personal things.)

In TTB it says 'If the employer adds the personal use of a company owned vehicle to the employee's W-2 as compensation, OR IF THE EMPLOYEE REIMBURSES THE EMPLOYER FOR PERSONAL USE, the employer is allowed to claim depreciation as if the vehicle was used 100% for business.' The reimbursed way seems much easier. Does anyone do it this way?

[veritas]

It is

not exempt from Fica-Futa-Suta.

I think paying all the expenses for the auto from the corporation is the easiest.

[JG EA]

Thanks, I saw that class in Pub 15-B on page 18. It discussed Vehicle allocation rules and this was under the heading Working Condition Benefits. Then on the chart on page 5 it said that Working condition benefits are exempt. And that's where I got mixed up.

not exempt from Fica-Futa-Suta.

I think paying all the expenses for the auto from the corporation is the easiest.

Perhaps easier for expenses, but do you consider putting this into wages easier? I sometimes get this information months after the fact. Too late for current payroll. It seems like if they reimbursed as they went for personal use it would just be a book entry instead of corrected payroll.

[abby]

reimbursement calculation

Hi JG

I sure agree that it can be difficult getting the information timely for the final payroll. Other than that, I think the reason adding it to the W2 is easier is that their is a relatively simple calculation to do using lease value table, and there is a form that can be used each year for each vehicle.

The complexity with remibursement might be in defining the procedure to identify what to reimburse. I'm not so sure using the lease value would fly - it seems that calculating personal use percentage of actual expenses would be required. I suppose that if the reimbursement occurred after the end of the year when all automobile expenses and depreciation were accrued, then it would be a simple matter to apply the personal use percentage to that total.

Still, if there were multiple vehicles, you'd have to keep expenses for each one separated and that could get sticky.

If anyone has used the reimbursement method, it'd be great to hear the procedures they've used.

[veritas]

Look at page 13-32 in TTB

You will find the annual lease value table you use for computing the benefit to be added to income.

At the top of the page it speaks to what to include if the corporation is paying the fuel.

Lastly you can use a period other than a calendar year to make the computation. We use 11-01 to 10-31. And we tell our clients that they will not get any payroll reports or W2s if we don' t get the information. That usually encourages them.

[JG EA]

Thanks Abby and Veritas. Abby, I would also like to hear from anyone who has used the reimbursement approach. For these particular clients who pay for fuel when used personally, leasing the car for personal-use sounds very good.