Thinking about providing your employee(s) with a car?
Before you hand over the keys, you need to ask yourself an important question.
“Will the vehicle be used by the employee for business or personal purposes?”
Make sure you have the answer and understand its consequences. Why? Because under one scenario, the car is taxable to your employee. Or, you can provide the vehicle to your employee as a tax-free fringe benefit excludable from the W-2.
Want to make certain that you’re handling this issue the right way? Read my new article titled Tax Tips: Tax Treatment of Vehicles Provided for Employees.
Three ways our fact-filled article can help you:
- We’ll tell you what constitutes “personal use.” This may sound obvious, but it’s not. We’re dealing with the IRS! To learn the four activities that Uncle Sam considers “personal use,” read the full article.
- We’ll explain how to provide valid “substantiation.” To avoid the taxable-wage category, your employees have to document their business use of the vehicle. This is called substantiation and you’ll learn how to provide it in an IRS-acceptable form when you read the full article.
- You’ll learn how to value your employees’ personal use. Once you’ve resolved usage issues, you’ll need to calculate the amount you’ll include as taxable income in your employees’ wages. We’ll show you how to do it when you read the full article.