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Yearly Archives: 2009
Is Your Employer Provided Auto Creating a Tax Problem for You?
By Stacie Clifford Kitts, CPA
Do you have an employer provided automobile? If so, here are some things to know.
The law provides that the personal use of an employer-provided automobile represents additional compensation to an employee. This compensation is also known as a taxable fringe benefit.
Many employees are surprised to learn that when you use a business vehicle to commute to and from work or for any other personal use, you are generating additional taxable income that will be included on your W2.
No, sorry you did not get an unexpected raise. This portion of our tax code is just another example of how nothing in life is free. Not even an innocent trip to the park, or maybe that parent teacher conference – at least not if you got there in the company car.
Anyway, since this additional income along with the appropriate payroll taxes is determined annually by your employer, it is important that you carefully document your business versus personal use of the vehicle. After all, there is no need to pay more tax than is necessary. At a minimum, you should maintain a daily log that shows the miles you have driven, the business purpose for your trip, and where you were going.
You may also want to discuss the need for additional income tax withholding with your CPA or qualified tax preparer to make sure there are no tax surprises during tax filing time.
Now, the calculation of the income element for your visit to that parent teacher conference or other personal trips can be based on a couple of methods. Your employer may choose any one of the following to calculate your taxable personal use:
Cents-Per-Mile Rule
Your employer will multiply the total miles you used the vehicle for personal use by the standard mileage rate.
In order to use this method certain requirements must be met. You can check out the details of this method in Publication 15-B Employer’s Tax Guide to Fringe Benefits.
Lease Value Rule
If your employer uses this method, your employer will determine the percentage of personal use by dividing the total miles driven by the amount of personal miles driven. The resulting personal use percentage will then be multiplied by the vehicles “lease value.” The IRS provides the Annual Lease Value table that will be used in this calculation. Additional calculation information can be found at Publication 15-B.
Commuting Rule
If your employer provides a vehicle for the purposes of commuting such as a commuter vanpool, the taxable benefit is calculated by “multiplying each one-way commute by $1.50.”
One final note for S corporation shareholders who receive a W2 and who have a company vehicle, if at any time during the year you owned more than 2% of the outstanding stock of your S-Corp you are treated like a partner and not an employee in regards to the application of these rules. Check with your CPA or tax preparer for more information.
The Obama Administration’s New Financial Crimes Taskforce, H.R. 4172 and the DUH Factor.
By Stacie Clifford Kitts, CPA
The announcement of a new financial crimes task force by the Obama administration has inspired a new installment of the DUH Factor.
The DUH Factor is my take on events, or laws (generally tax) that are so obviously absurd that they fall into the DUH category.
Among the reasons why this new task force qualifies for my DUH Factor is Treasury Secretary Timmy Geithner’s involvement. Of all the people who could have been selected to announce a new financial crimes task force, I think Geithner would have been a little lower on my list.
Why?
Lets begin with this quirky post Has Properly Paying My Income Tax Prevented Me From Getting A Job In the Obama Administration? In this post, I mention that Geithner did not calculate and pay the proper amount of self-employment taxes on income that he received. The unpaid taxes as it turns out were related to self employment compensation received from the International Monetary Fund (IMF).
Because of Geithner’s tax oops, some interesting legislation is proposed, H.R.4172 or the Geithner Penalty Waiver Act. Here is what has been introduced:
1st Session
H. R. 4172
To provide the same penalty rate for taxpayers who voluntarily disclose
unreported income from offshore accounts as was afforded Timothy Geithner with
respect to his failure to pay self-employment taxes with respect to his
compensation from the International Monetary Fund.
December 2, 2009
Mr. CARTER (for himself, Mr. WESTMORELAND, and Mr. BURGESS) introduced the
following bill; which was referred to the Committee on Ways and Means
A BILL
To provide the same penalty rate for taxpayers who voluntarily
disclose unreported income from offshore accounts as was afforded Timothy
Geithner with respect to his failure to pay self-employment taxes with respect
to his compensation from the International Monetary Fund.
Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled,
SECTION 1. ZERO PENALTY RATE FOR OFFSHORE VOLUNTARY DISCLOSURE PROGRAM.
The penalty assessed under the Internal Revenue Service special voluntary
disclosure program for unreported income from hidden offshore accounts shall not
exceed the penalty imposed with respect to Timothy Geithner’s failure to pay the
tax imposed under section 1401 of the Internal Revenue Code of 1986 on his gross
income derived from employment with the International Monetary Fund.
Now granted, we, the public are not privy to the specifics behind exactly why the penalties were waved. Maybe it was perfectly legit.
But come on, the guy who has inspired “fairness” legislation, because it “appears” that he has received special treatment concerning his financial dealings and the incorrect application of certain tax laws, is probably not the right guy to be introducing a new financial crimes task force. DUH
For some more interesting coverage of this proposed legislation, check out the Wandering Tax Pro’s blog.
Stacie's Tax Stuff 