In a BLR webinar entitled "Mileage/Commuting Expenses: How to Avoid Big Mistakes With These Employee Expenses," Mark E. Tabakman, Esq., partner in the nationwide law firm Fox Rothschild, LLP and Stacy Wade, Ph.D., CPA, assistant professor of accounting at Western Kentucky University, explained that leasing is the most popular option when providing company-owned vehicles. Doing so will minimize your upfront cash expenses and keep the vehicles off your balance sheet. However, both leasing and direct ownership costs are deductible as business expenses.
- The IRS considers employer-provided vehicles a "working condition benefit," and the documented business usage of the vehicles is not subject to federal taxes for the employee. However, the personal use of them is subject to taxes.
- You should require workers with company-issued vehicles to maintain accurate logs showing each trip's date, purpose, and number of miles driven (as well as whether the trip was business or personal). You should keep your car-related records for at least three years, in case you're audited. And, the IRS provides guidelines on how to value leased and owned cars and how to reflect employees' personal car usage on their W-2 forms each year.
- (Also, make sure you have sufficient insurance coverage on employee-issued vehicles, because you're liable for them around the clock -- even when they're being used for personal trips!)
Mark E. Tabakman, Esq., is a partner in the nationwide law firm Fox Rothschild, LLP (www.wagehourlaw.foxrothschild.com). He advises clients throughout the country on all aspects of labor relations and employment law, as well as the development of corporate employment policies. Stacy Wade, Ph.D., CPA, is assistant professor of accounting at Western Kentucky University (www.wku.edu). She teaches undergraduate and graduate courses in financial accounting and taxation.