Reporting Taxable Fringe Benefits
Agencies are required to provide the Office of the State Comptroller (OSC) with the information on the value of the personal use of employer-provided vehicles and chauffeur services to ensure compliance with IRS Rules and Regulations.
Agencies should have an established process in place requiring employees to substantiate their business use of State-provided vehicles and chauffeur services. If an employee is unable to substantiate business use, all miles driven are deemed to be for personal use, and the value must be included in the employee’s income.
Personal use of an employer -provided vehicle generally includes use of the vehicle for purposes of commuting to and from an employee’s home and his or her official work station and other trips unrelated to work.
Agency personnel responsible for participating in reporting the information are the Agency Representative and the Agency Vehicle Coordinator. The Agency Representative is the person, designated by the head of the agency, who attests that the valuation is, to the best of their knowledge, true and compliant with IRS regulations.
Information about the vehicle itself, such as the make, model and Kelley Blue Book Value, should be provided by the person(s) in the agency responsible for acquiring, tracking and securing vehicles for the agency.
Valuing Personal Use of Vehicles
Employees must choose from one of three methods acceptable to the IRS to determine the value of the personal use of an employer- provided vehicle. Agencies must review and approve the valuation method chosen to ensure that the State of New York is in compliance with IRS regulations.
The acceptable valuation methods are:
- Annual Lease Value (ALV) – Most appropriate when the vehicle is provided for general use, both personal and business, by the employee.
- Commuting Rule – Most appropriate when the vehicle is provided primarily for commuting and the employee is expected to use the vehicle for commuting.
- Cents-Per-Mile – This method is the most restrictive and cannot be used if the fair market value exceeds set amounts in the year the vehicle was assigned or if the ALV method was used in the previous three (3) years.
Valuing Personal Use of Chauffeur Services
The value of personal use of chauffeur services is usually based on the fair market value of obtaining such services in the market place. An alternative method is to use the actual compensation of the chauffeur as defined in Internal Revenue Code Section 415(c)(3).
Computing the Value of Personal Use
Agencies must ensure that employees with employer-provided vehicles submit a completed Agency Report of the Taxable Value of Personal Use (AC 3173) for the period of November 1, 2010 through October 31, 2011.
Agencies must review the form to determine if it is acceptable and in compliance with IRS regulations. Agencies must also retain the form for four (4) years so that it is available in the event of an OSC or IRS audit.
The personal use amount must be reported by using Earn Code FRB. Enter the transaction in the Time Entry page or Miscellaneous File using the current pay period effective dates. The taxable amount for 2011 should be processed in PayServ as soon as possible, but no later than Pay Periods 18-Lag and 19-Current for Institution and Pay Periods 18-Lag and 19-Current for Administration agencies to ensure the appropriate taxes are withheld for tax year 2011. Failure to meet the deadlines may result in negative tax consequences for the employee.
If an agency is unable to report the transaction within the timeframe, the agency should submit the Agency Report of the Taxable Value of Personal Use (AC 3173) to OSC as soon as possible. The worksheet should be sent to the Tax and Compliance mailbox for inclusion in the 2011 Form W-2 processing. OSC will make every effort to reflect this information in the Form W-2, but provides no guarantee. Late reporting may result in the employee receiving a Corrected Form W-2, which may require the employee to file an amended tax return.