Legal bee help? Company car question/IRS reg

posted 2 years ago in Legal
Post # 17
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9133 posts
Buzzing Beekeeper

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beevincent18 :  but if he doesn’t have a daily commute then that makes zero sense – they can’t just fabricate one. Does he have a home office? Personally I would rather use my own car and charge them the mileage I actually use rather than deal with that nonsense. 

Post # 19
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9129 posts
Buzzing Beekeeper

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beevincent18 :  Ok, I’m not a lawyer or an IRS person, but I believe what the deal is, is that per IRS regulations, “personal use” of a company car is considered a taxable fringe benefit. An employee’s “daily commute” is considered personal use. Companies will typically calculate the value of the “daily commute” and that is recorded as “imputed income” for taxing purposes. I have never heard of a company actually charging the employee for the mileage. They just tax you on it. Is it possible that that’s what they’re saying — that he’ll be taxed on that $0.40/mile, as opposed to them actually deducting it from his paycheck? If they are charging him, I don’t think Uncle Sam would be too happy to see that money going into the company’s pocket instead of the IRS.

ETA: Check out #3 here: https://www.automotive-fleet.com/158255/5-avoidable-mistakes-in-managing-personal-use 

Post # 21
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458 posts
Helper bee
  • Wedding: May 2019 - York, ME

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beevincent18 :  Can he park the company car at the closest store and just commute to that and drive from there? 

Post # 22
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9129 posts
Buzzing Beekeeper

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beevincent18 :  They would have to use some kind of formula to come up with the daily commute amount and it seems like figuring a round trip to and from the nearest or most common office would be appropriate. Annoying, but that part seems legit. Deducting it vs taxing it is the part that seems totally not legit. If they are deducting, he should do the math to see if it makes more sense to give the car back and have them reimburse him for business miles on his personal car. (They would still need to figure a “daily commute” though and reimbursement would be for miles beyond that amount.)

Post # 24
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8389 posts
Bumble Beekeeper

 

I think you are getting confused with the home store part. In general (ok in canada and for my international company) the first and last part of a trip doesnt count towards mileage. They picked this store to be his “home store”, so any km to and from this store are considered a normal commute. For me, this is based on mileage/km ONLY, not location. So for example – this location is 9 miles from my home west. The store I am going to is 20 miles east. I would deduct 9 miles from this leg, and the other 11 is what is being reported. Again, this is just for me and my company, but it would be absurd to go to that store and then go to another store in the opposite direction if he’s not going there. For me, it’s just based on the miles to/from the home store. 

My company no longer offers company cars, but we expense mileage like this. If one doesn’t have a home store, I believe they just expense anything over 70km round trip per day (not sure if this is company policy or canada revenue). 

Post # 25
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559 posts
Busy bee

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Daisy_Mae :  100% right. 

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beevincent18 :  Daisy is right… They have to “fabricate” something for a daily commute or the IRS goes after them. The idea of it being from your home to the closest store actually makes sense. Unfortunately, that’s not what you wanted to hear. 

I oversee payroll for my company and we do it differently and knock everyone at the end of the year for “personal use of business vehicles.” They get the full year taken out of their last check of the year, so what your husband’s company is proposing actually sounds pretty decent. 

Sounds to me like they either got audited or hired someone who knows the rules better. I don’t think there is any way to get around this. It’s not the company. It is the IRS. 

Your best bet may be for him to use his personal vehicle and bill them for miles, if they will allow it, but make sure you figure all your vehicle expenses, maintenance and wear and tear to see if you’ll really be getting ahead by doing that. All depends on the miles driven and what he drives. 

The IRS is becoming a real stickler for all of these cross business/home items. Your husband may never even use the vehicle for personal stuff, but the IRS does not care. It is their assumption that he does. 

Post # 26
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508 posts
Busy bee

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Daisy_Mae :  I started writing a whole response, then saw your answer – you are 100% correct.  

OP: The key here is that he would be TAXED on the mileage charges – which will be a fraction of the mileage charge.  It sounds like the company needs to hire an employment and tax lawyer to get themselves straightened out. 

Post # 27
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295 posts
Helper bee

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jellybellynelly :  

This is exactly what i thought do. He is still getting paid for all mileage beyond what would be his usual daily commute if he worked at his home store. The fact that they are using the closest place actually works in his favour because he actually gets paid for every extra km beyond those 18km. They are just deducting the least amount possible to account for a normal commute that he would be paying if he didnt have to travel for work.

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