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Date: October 3, 2013

Bulletin Number: 1269

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Subject

New Earnings Code and Procedures for Reporting the Taxable Value of Personal Use of Employer-Provided Vehicles and Chauffeur Services for Tax Year  2013

Purpose

To inform agencies of the new Earnings Code  to be used to report the taxable value of personal use of an employer provided vehicle and  chauffeur services and provide instructions for reporting this information in the New York State Payroll System (PayServ) for tax year 2013.

Affected Employees

Employees with employer-provided vehicles and/or chauffeurs.

Effective Date(s)

Immediately.

Background

Personal use of employer provided vehicle and chauffeur services are fringe benefits.  

Per the Internal Revenue Service (IRS) Rules and Regulations, most fringe benefits are taxable income that must be included in the employee’s taxable gross wages.  This income is reportable on the employee’s Form W-2 and is subject to income and employment taxes.

OSC Actions

Office of State Comptroller (OSC) has created the new  Earnings code, PEV (Personal Employer Vehicle), to be used specifically for reporting the taxable value of personal use of an employer provided vehicle and chauffeur services.

OSC will report the value of both the personal use of an employer-provided vehicle and the personal use of employer-provided chauffeur services for the period November 1, 2012 through October 31, 2013 as income on the employee’s 2013 Form W-2 using the new Earnings Code PEV (Personal Employer Vehicle).

Agency Actions

Reporting Taxable Fringe Benefits

Agencies are required to provide the Office of the State Comptroller (OSC) with 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 (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 regulation) and the Agency Vehicle Coordinator.

The following information about the vehicle itself must be provided by the person(s) in the agency responsible for acquiring, tracking and securing vehicles for the agency.

  • Make
  • Model
  • Kelley Blue Book Value

Valuing Personal Use of Vehicles

Employees must choose from one of the 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.

Cost of any Charges Incurred During Personal Usage

Officers and employees who are permitted to utilize State vehicles for personal use must reimburse the State for the costs of any charges incurred during any personal usage.  These charges may include tolls paid with EZ Pass accounts or other credit cards issued by the State.  If these charges were not reimbursed by the officer or employee, agencies must add these costs to the total valuation method used.

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, 2012 through October 31, 2013 prior to the deadline established below.

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.
Agencies must report the value of the housing in Time Entry using the new Earnings Code PEV and enter the following information into the Time Entry Page:
Earnings Begin Date: Enter the last date of the pay period
Earnings End Date: Enter the last date of the pay period
Earnings Code: PEV
Amount: Taxable Amount
Agencies are encouraged to notify employees of transactions.
The Earnings Code PEV will appear on the payroll register. The Earnings Code description and amount will appear on the employee’s paycheck stub or direct deposit advice statement.
To ensure the appropriate taxes are withheld for tax year 2013, the taxable amount for 2013 should be processed in PayServ as soon as possible, but no later than:

  • Pay Periods 18-Lag and 19-Current for Institution agencies
  • Pay Periods 19-Lag and 20-Current for Administration agencies

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 provided, the agency must submit the Agency Report of the Taxable Value of Personal Use (AC 3173) to OSC before January 3, 2014.The Agency Report must be emailed to the Tax and Compliance mailbox for inclusion in the 2013 Form W-2.  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.

Tax Withholding

The taxable value of personal use of an employer-provided vehicle is subject to income and Social Security/Medicare taxes and must be reported as income on the Form W-2 Statement.  The State of New York will not withhold Federal income taxes.  However, State, Local and Social Security/Medicare taxes will be withheld. 

No tax withholding will occur on amounts reported for inactive employees.  

OSC will include the taxable value on the employee’s Form W-2 and assess a tax deficiency for any required Social Security and/or Medicare taxes.  

The amount of the taxable value is not considered salary for the purposes of computing retirement benefits.

Employee’s Paycheck/Advice

The new Earnings Code PEV (Personal Employer Vehicle) and the amount of the taxable value will appear on the employee paycheck or direct deposit advice.

Supporting Documents

Please click on the links below to access the following documents:

Guidance on Determining the Value of the Personal Use of Employer-Provided Vehicle

Guidance on Determining the Value of the Personal Use of Employer-Provided Chauffeur Services

Guidelines for Qualified Non-personal Use of Vehicles

Annual Lease Value Table

Agency Report of the Taxable Value of Personal Use

Internal Revenue Service Publications

For additional information and guidance please refer to the IRS Publications listed below:

  1. IRS Publication 15 (Circular E, Employer’s Tax Guide)
  2. IRS Publication 15-B (Employer’s Tax Guide to Fringe Benefits)
  3. Internal Revenue Service Publication 525 (Taxable and Nontaxable Income)

Questions

Questions regarding this bulletin may be e-mailed to the Tax and Compliance mailbox.