Purpose

The purpose of this bulletin is 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 2021.

Affected Employees

Employees with employer-provided vehicles and/or chauffeurs are affected.

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.

Effective Dates

Effective immediately.

OSC Actions

OSC will report the value of personal use of an employer-provided vehicle and personal use of employer-provided chauffeur services for the period 11/01/2020 through 10/31/2021 as income on the employee’s 2021 Form W-2 using Earnings Code PEV (Personal Employer Vehicle).

Agency Actions

Reporting Taxable Fringe Benefits

Agencies are required to provide 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 workstation 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.

Note: Due to the Tax Cuts and Jobs Act (for dates beginning after 12/31/2017 and before 01/01/2026), the maximum fair market value of a vehicle (automobiles, vans, trucks) made available to employees when calculating the Cents-Per-Mile Valuation or the Fleet Average Valuation rules is $51,100 under Income Tax Regulation Section 1.61-21.

Valuing Personal Use of Vehicles

Employees must choose from one of three IRS accepted methods to determine the value of the personal use of an employer-provided vehicle. Agencies must review and approve the valuation method chosen to ensure New York State is in compliance with IRS regulations.

The acceptable valuation methods are:

1. Annual Lease Value (ALV) – Appropriate when vehicle is provided for general use, both personal and business, by the employee. If assignment of vehicle is for a reporting period of less than the full 12 months, employees have the option of using the Prorated Annual Lease Value method or the Daily Lease Value method.
2. Commuting Rule – Appropriate when vehicle is provided primarily for commuting and employee is expected to use vehicle for commuting.
3. Cents-Per-Mile – Most restrictive method and cannot be used if 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 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 marketplace. An alternative method is to use the actual compensation of chauffeur as defined in Internal Revenue Code Section 414(q)(7).

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 11/01/2020 through 10/31/2021 prior to 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 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 Time Entry Interface File (NPAY502) using current pay period effective dates. Taxable amount for 2021 should be processed in PayServ as soon as possible, but no later than Pay Periods 19-Lag and 20-Current for Institution agencies and Pay Periods 18-Lag and 19-Current for Administration agencies to ensure appropriate taxes are withheld for tax year 2021. Failure to meet deadlines may result in negative tax consequences for employee.

If an agency is unable to report the transaction within the timeframe provided, the agency must submit Agency Report of the Taxable Value of Personal Use (AC 3173) to OSC before January 3, 2022. Form AC3173, approved by OSC, is the only acceptable form that Agencies should submit. Agencies and/or employees must complete one Form AC3173 per vehicle assigned. Agencies should retain their internal documentation unless requested by OSC. The Agency Report must be emailed to the Tax and Compliance mailbox for inclusion in the 2021 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 employee receiving a Corrected Form W-2, which may require employee to file an amended tax return.

Tax Withholding

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. It must be reported as income on the Form W-2 Statement. New York State will not withhold Federal income taxes. However, State, Local, and Social Security/Medicare taxes will be withheld at the Aggregate method.

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

Employee’s Paycheck/Advice

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

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 Nonpersonal 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 IRS Publications listed below:

IRS Publication 15 (Circular E, Employer’s Tax Guide)

IRS Publication 15-B (Employer’s Tax Guide to Fringe Benefits)

IRS Publication 525 (Taxable and Nontaxable Income)

Questions

Questions regarding this bulletin may be directed to the Tax and Compliance mailbox.