If your employees are driving a company-owned vehicle, it is important that they keep detailed records of the miles driven for business and those driven for personal use. The breakdown of miles driven throughout the year will be used along with the Fair Market Value of the vehicle to determine their taxable compensation for use of the company vehicle during the year.
An employee’s (or business owner’s) use of a company vehicle for personal driving is considered a fringe benefit. This benefit is taxable compensation and needs to be included in W2 wages at the end of the year.
Make sure employees are tracking their mileage throughout the year as they drive for work so that you can calculate the percentage of time they are driving their company vehicle for business vs. personal use. It is easiest to track the beginning mileage and business mileage and then at the end of the year, you can calculate the personal mileage by calculating the business miles driven divided by the total miles driven. Provide this information to your payroll provider at year-end to get the appropriate adjustments made to W2s.
Allissa Rousselo, Controller