To inform agencies of the procedures and provide instructions for reporting the taxable value of personal use of an employer-provided vehicle and chauffeur services in the New York State Payroll System (PayServ) for tax year 2017.
Employees with employer-provided vehicles and/or chauffeurs
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 will report the value of personal use of an employer-provided vehicle and personal use of employer-provided chauffeur services for the period November 1, 2016 through October 31, 2017 as income on the employee’s 2017 Form W-2 using 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 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 Agency Vehicle Coordinator(s). This is 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. If assignment of the vehicle is for a reporting period of less than the full 12 months, then employees have the option of using the Prorated Annual Lease Value method or the Daily Lease Value method.
- 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.
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, 2016 through October 31, 2017 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.
The taxable value of the personal use amount must be reported by using the Earnings Code PEV (Personal Employer Vehicle). Enter the transaction in the Time Entry page or submit on the Miscellaneous File using the current pay period effective dates. The taxable amount for 2017 should be processed in PayServ as soon as possible, but no later than Pay Periods 18-Lag and 19-Current for Institution agencies and Pay Periods 18-Lag and 19-Current for Administration agencies to ensure the appropriate taxes are withheld for tax year 2017. 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 9, 2018. The Agency Report must be emailed to the Tax and Compliance mailbox for inclusion in the 2017 Form W-2. OSC will make every effort to reflect this information on 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.
The taxable value of personal use of an employer-provided vehicle is supplemental taxable income and 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 at Aggregate method.
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 establish 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.
Earnings Code PEV (Personal Employer Vehicle) and the amount of the taxable value will appear on the employee paycheck or direct deposit advice.
Please click on the links below to access the following documents:
Internal Revenue Service Publications
For additional information and guidance please refer to the IRS Publications listed below:
- IRS Publication 15 (Circular E, Employer’s Tax Guide)
- IRS Publication 15-B (Employer’s Tax Guide to Fringe Benefits)
- Internal Revenue Service Publication 525 (Taxable and Nontaxable Income)
Questions regarding this bulletin may be emailed to the Tax and Compliance mailbox.