TOPIC: Taxable Fringe Benefits
OFFICE: Department of Finance and Management
QUESTION / ISSUE:
STATE: VA
DATE: 02/05/2014
I would like to ask if states would be willing to share any policies or other related guidance they have developed
pertaining to the reporting of Taxable Fringe Benefits. I am most specifically interested in how they handle
commuting with state owned vehicles. Anyone that is willing to share can send the information directly to me.
State
Alaska
Comments
Alaska sends out a notice every year regarding the use of state owned vehicles; which I have
copied and pasted here. Additionally, if the Division of Finance becomes aware of any
vehicle usage, we reach out to that department to ensure it is being reported properly.
Good morning,
The annual memorandum regarding employee’s personal use of a state owned vehicle has
been updated and posted on the Division of Finance web page.
Letter to State of Alaska Vehicle Users – Personal Use of State Vehicles
http://doa.alaska.gov/dof/payroll/resource/personal_use_state_vehicles.pdf
This letter explains that personal use of a state vehicle is a taxable benefit to the employee
and must be reported on an employee’s W-2. It outlines the employee’s responsibility to
keep adequate records to provide evidence of the use (business/personal), and the various
valuation methods that are acceptable by the IRS.
Please also review the following two links for additional information regarding vehicle usage.
The first is a link to the Alaska Administrative Manual fringe benefit section and the second is
a link to the Department of Transportation and Public Facilities policies related to the use of
state vehicles.
AAM 320.300 – State Vehicle Usage
http://doa.alaska.gov/dof/manuals/aam/resource/320.pdf
DOTPF Policies and Procedures – Chapter 11 Statewide Equipment Fleet
Section 11.04.010 Use and Storage of State Vehicles and Equipment (Includes Attachments
A – E)
http://www.dot.state.ak.us/admsvc/pnp/policy_and_procedures.shtml#11
Please forward this email to your employees utilizing state vehicles to ensure that they are
aware of the policies surrounding the use of state provided vehicles, the documentation
required and the taxable consequences surrounding the use of those vehicles.
I appreciate your assistance to ensure the State of Alaska is in compliance with the tax rules
regarding vehicle usage.
State
Arizona
Comments
Arizona does not have any stand-alone statewide policy regarding the reporting of taxable
auto usage (or the criteria for determining if or how much is taxable) of state owned vehicles.
We endeavor to comply with and therefore refer state agencies to the IRS Publication 15-B
http://www.irs.gov/pub/irs-pdf/p15b.pdf (pages 22-24) for guidance in this area.
State agencies that would have taxable transactions for an employee’s use of a state owned
vehicle would record it as taxable income in the payroll system for the applicable employees.
I have attached some more operational-type policy information from two of our state
agencies. “Use of State Vehicle” – See #17 (I have also attached the form) “SUP031 24
Hour Vehicle” – This policy was last reviewed in 2008.
Use of State
Vehicle.doc
Delaware
Mothly Domicile
Report.doc
The state of Delaware Vehicle Usage policy is attached.
Delaware
Employer_Provided Vehicle Usage Policy.pdf
Iowa
Iowa’s policy on the use of state owned vehicles for personal use can be found at:
http://das.sae.iowa.gov/internal_services/manual_docs/210-130.pdf.
State
Kentucky
Comments
Kentucky employs two methods to assess and report the vehicle use taxable benefit for
employees with assigned state vehicles: the commuting rule and annual lease valuation.
For most commonwealth of Kentucky employees assigned a state vehicle, the
commonwealth applies the commuting rule to determine the taxable benefit, reporting a
taxable benefit value of $1.50 per one-way trip. Affected employees report the number of
trips on their timesheet each payperiod, which is certified with their signature and date. The
human resource administrator for the agency calculates and enters the value of these trips
into the payroll system using a wage type designated for reporting employee vehicle use
taxable benefit.
Elected officials in the Executive Branch who have employment tax responsibilities for their
take home vehicles employ the annual lease valuation method. When the elected officials
take their assigned vehicles home, they are responsible for including the value of the
commuting and personal miles, including a gasoline assessment, as a taxable fringe benefit.
Each quarter, month, or payperiod, each elected official reports his or her personal mileage.
The fringe benefit is calculated based on the annualized lease value and IRS formulas. The
total is submitted for inclusion in the taxable wages for W-2 reporting.
The annual leave valuation rule is based upon the fair market value of the vehicle and is
determined under the annual lease value table provided by the IRS. The fair market value of
the car, for purposes of calculating the annual lease value, may be deemed to be the
employer’s cost of purchasing the car in an arm’s length transaction. This would include
such expenses as taxes and title fees. The fair market value may also be determined by
using the retail value of such car as reported in a nationally recognized publication that
reports retail car values, such as the Kelley Blue Book.
The IRS table is based on a four-year lease term. The annual lease value determined from
the table remains in effect for the period that begins with the first date the valuation rule is
applied by the employer and ends on December 31 of the fourth full calendar year following
that date, if the car continues to be available to the employee. At the beginning of the fifth
year (and every four years thereafter) the annual lease value must be re-determined based
upon the fair market value of the car on January 1 of that year. A recalculation must also be
made if a car is transferred to another employee, based on the fair market value as of
January 1 of the year of the transfer.
Maintenance and insurance are included in the annual lease value table because it is
assumed that the employer provides these services. The annual lease value table does not
include the value of any fuel provided by the employer. This fuel may be calculated at fair
market value or 5.5 cents per mile driven. This must be included in the employee’s taxable
wages.
We recommend the use of a form, given to each elected official who is assigned a state
vehicle, for reporting the information needed to arrive at the personal use value of the stateowned vehicle for purposes of calculating the taxable fringe benefit.
Once the elected official returns the form to the human resource administrator, the taxable
benefit is calculated and entered into the payroll system using a wage type designated for
reporting employee vehicle use taxable benefit. A copy of the calculation is provided to the
elected official by the human resource administrator, and the official is advised of what
schedule (per payperiod, monthly, or quarterly) the reporting will follow.
State
Massachusetts
Comments
Payroll - Process Non-cash Car Benefits Introduction:
Each year, the commonwealth reports its motor vehicle commuting use during the period
from November 1st through October 31st. Employees who commute in commonwealth
provided vehicles must report only if they have had 15 or more non-exempt commutes during
the November through October period. Each eligible commute has a cash value of $1.50.
Entering a non-cash car benefit allowance is a one-time annual process. Commutes during
the period of November 1st to October 31st are entered into the system using the Additional
Pay page.
Note: This benefit does not increase the individual's federal and state taxes withheld in the
current paycheck. It does add to federal and state gross taxable wages and is subject to tax
for Medicare (if applicable), UI and UHI.
Attached please note our complete job aid for processing non cash car benefits as well as
the Required Fringe Benefit for Tax Reporting for Tax Year 2013 and a car fringe benefit
validation CTR performs as part of our Year End Validation.
Payroll - Process
Non-cash Car Benefit.doc
Michigan
Fringe Benefit
reporting 2013 -Auto.doc
car validation
2013.docx
Please see links to state of Michigan State Owned Vehicle policies. The logs are used to
record personal use of vehicle in our payroll system.
http://michigan.gov/documents/dmb/0410.02_182324_7.pdf
http://michigan.gov/documents/dmb/0410.03_182325_7.pdf
Minnesota
Here is the Minnesota policy on Reporting Personal Use of Employer-Provide Vehicles for
Tax Purposes.
PAY0019 Reporting
Personal Use of Employer-Provided Vehicles for Tax Purposes.docx
State
Nebraska
Comments
Commuting - The IRS defines commuting as the use of a vehicle for travel in any of the
following situations. From the employee’s:
1)
2)
Regular place of employment to the employee's residence.
Residence to regular place of employment.
A. Commuting expenses are defined by the Internal Revenue Service as those expenses
incurred in traveling from one's residence to one's regular place of employment and one's
regular place of employment to one's residence, no matter how often this occurs during a
day. These are considered personal expenses and are, therefore, unallowable expenses
when using a non-state vehicle.
B. Expenses incurred in traveling from one's residence to a temporary work location are not
considered commuting expenses and are reimbursable when using a non-state vehicle.
C. According to regulations issued by the Internal Revenue Service, certain responsibilities
are required of employers who have employees that use state vehicles for commuting
purposes.
The regulation provides that a value of $1.50 for one way commute ($3.00 for round trip
commute) be added to the employee’s income. Social Security taxes must be withheld on
this income at least once a year. Federal and state income taxes need not be withheld,
although the income will be included on the employee’s W-2.
Each agency is responsible for maintaining the necessary supporting documentation and
correctly entering the withholding into the Nebraska Information System
(ENTERPRISEONE). State Accounting may ask to review such supporting documentation at
any time. Use of a state vehicle for commuting is recorded in the payroll system by using
Pay Type 530. A “one-way” commute would be entered as .50 hours; a round trip commute
would be entered as one hour. Two round trip commutes in one day would be recorded as
two hours. Commuting adjustments must be processed during the calendar year payroll and
can be entered as they occur or on a quarterly, semi-annual or annual basis. The entry is
subject to Social Security and the employee’s Social Security deduction will increase on their
payroll when the entry is processed.
A de minimis exception, (which means we do not have to report usage), is allowed when an
employee does not use an employer provided vehicle in a commuting capacity more than
once a month.
The regulations also provide that where more than one employee commutes in the same
employer provided vehicle, each employee is subject to the $1.50/$3.00 income value.
IRS regulations provide that an employer may use a cutoff date prior to the calendar year
end to ease the processing of current year’s W-2s. State Accounting has established a
November 30th cutoff date which allows sufficient time to collect the necessary data and
process the required paperwork in December.
Generally, a state employee whose home is their official office would not incur any
commuting income.
State
New Jersey
Comments
Here are the Circulars for Taxable Fringe Benefits from New Jersey.
life insurance
circular.pdf
Pennsylvania
vehicle circular.pdf
Management Directive 315.20 - Taxability of the Use of State-Provided Vehicles 05/01/2013
http://www.portal.state.pa.us/portal/server.pt/gateway/PTARGS_0_2_785_711_0_43/http%3
B/pubcontent.state.pa.us/publishedcontent/publish/global/files/management_directives/financ
ial_management/315_20.pdf
Texas
Because each state agency in Texas is a separate employer for tax reporting purposes,
there is no state policy or guidance on reporting of taxable fringe benefits related to
commuting with state owned vehicles.
Utah
Here is a copy of our policy.
State Vehicle Usage
Policy.pdf
Virginia
Here is a link to Virginia’s policy on using state vehicles. The link takes you to the Office of
Fleet Management Policies & Procedures issued by the Department of General Services.
They are responsible for setting the policy on commuting with a state-owned vehicle. The
section on commuting begins on page 13.
http://www.dgs.virginia.gov/LinkClick.aspx?fileticket=Wc0oOVxAxlA%3d&tabid=173