Personal Use of Company Auto

Did you know if you use a company vehicle for personal use, that benefit is taxable compensation to you? The IRS requires that personal use of a company automobile be calculated for each person receiving the benefit.

The calculation is based on the personal mileage compared to business mileage, a personal gas factor of 5.5 cents per personal mile, and the IRS guidelines for the annual lease value of employer-provided vehicles. Recent IRS audit information shows that personal use of company auto generally is found to be in the 20% to 30% range. Business mileage does not include commuting miles, so these need to be included in the personal use percent. Adequate records, such as mileage logs, must be kept to support business use.

Any personal use is added to the employee’s W2 by issuing the employee a salary check. The employee will have Social Security and Medicare taxes withheld from the gross amount of personal use. Federal and state taxes are not required, but the employer may choose to withhold federal and state taxes. The employer is responsible for matching the Social Security and Medicare taxes and remitting any federal or state withholding on the personal use. If the employer does not withhold the income taxes, you will need to notify the employees so they can adjust any personal tax estimates for the consequences of the personal use.

For more information on this topic contact Bethany Pusifull at bethany.pursifull@bellandocmpany.net or call her 501.753.9700.