Car, Personal Use of Leased Vehicle
Process for Taxation of Non-wage Compensation
Description
A leased vehicle is provided to an employee for his/her business use.
This will appear on the employee’s paycheck as:
Employee’s Responsibility:
Provide to department each quarter:
- Total miles driven (beginning & ending mileage)
- A mileage log of business travel
For more information about employer provided vehicles, please See Chapter 6 of IRS publication 463
College or Department’s Responsibility:
- Provide University Payroll with a copy of the lease agreement when the employee takes possession of the vehicle, showing the fair market value of the vehicle.
- Provide the following information to University Payroll on a quarterly basis as shown below:
- Employee Name
- Employee ID number
- Inclusive Dates (i.e. February 1, 20XX to April 30, 20XX)
- Total number of miles driven for personal use
- Dollar amount to be taxed (see example below)
| November – January |
Due by February 5th |
| February – April | Due by May 5th |
| May – July | Due by August 5th |
| August – October | Due by November 5th |
University Payroll’s Responsibility:
- Use the fair market value of the vehicle to determine the annual lease value as outlined in IRS Publication 15B and provide to the department for their quarterly calculations.
- Add calculated value of personal use amount provided by department each quarter to employee’s gross earnings for purposes of Social Security & Medicare tax calculation
- If information is not provided for an employee for a quarter, the entire quarterly lease value will be taxed on the next payroll. Adjustments will not be made if reported at a later date.
To Calculate the Amount to be Taxed:
- From the total number of miles driven, deduct the number of business miles driven to determine the number of personal miles for the quarter.
- Calculate the percentage of personal miles for the quarter:
Example:
| Total number of miles driven for the quarter | 3,000 |
| Total number of personal miles for quarter | 750 |
| Percentage driven for personal use | 25% |
- Take the annual lease value supplied by University Payroll and divide by four to arrive at the quarterly lease value.
| Total Annual Lease Value |
$9,150.00 |
| Total Lease Value for the Quarter |
$2,287.50 |
|
|
Multiply by the percentage
driven for personal use: |
25% |
| Dollar amount to be taxed |
$571.88 |
