01-P-043 Employee Taxability for the Personal (Commuting) Use of a State-Owned Vehicle (Supersedes 00-P-025)
|DATE:||May 15, 2001|
|SUBJECT:||Employee Taxability for the Personal (Commuting) Use of a State-Owned Vehicle|
|CONTACT:||Roger Basinger||(785) 296-5387||(firstname.lastname@example.org)|
|SUMMARY:||Information Concerning Employee Use of State-Owned Vehicles|
The information provided herein is based on current provisions of the Internal Revenue Service Code, Treasury Regulations, Kansas Statutes Annotated and Kansas Administrative Regulations.
In general, an employee's personal (commuting) use of a state-owned vehicle is a taxable fringe benefit. Employer's who allow employee's personal (commuting) use of a vehicle are generally required to determine the value of the personal (commuting) use and include it in the employee's gross income. The value of the personal (commuting) use is generally subject to income, Social Security and Medicare taxes. The Internal Revenue Service (IRS) currently utilizes the Annual Lease, Commuting and Cents-Per-Mile methods to determine the amount of fringe benefit income to include in employee wages. The requirements for the different valuation methods will be discussed in Appendix A.
Please note that Qualified Nonpersonal Use Vehicles are exempt from the taxability requirements, since these vehicles are unlikely to be used more than minimally for personal use because of their special design. Vehicles that qualify for this exclusion are listed in Appendix D.
Field employees, such as inspectors, do not report fringe benefit income for official travel between the employee's residence and work sites. To qualify for the exclusion, the employee's residence must be designated as the employee's official work station because over 50% of the employee's work time involves direct travel from his or her residence. Please note that any incidental travel would be considered commuting and subject to fringe benefit income reporting.
K.S.A. 8-301 states that all state-owned vehicles are for official business only and may not be used for personal business or pleasure. Kansas Administrative Regulation 1-17-2a states that a state-owned or leased motor vehicle shall not be used to commute between the employee's residence and the employee's official work station, except:
(1)(A) When parking the vehicle at the official work station overnight subjects the vehicle to a high risk of vandalism.
(1)(B) When the vehicle is used by an official or employee who is regularly called to duty after normal work hours in connection with law enforcement activities or dealing with emergencies which result from an act of God.
(1)(C) For trip vehicles assigned to the traveler, on the evening of the work day immediately preceding the date of travel or the evening of the work day in which travel is completed.
K.A.R 1-17-2a also states when a state-owned or leased vehicle is authorized to be used for travel to a employee's place of residence under paragraphs (1)(A) or (1)(B), the "reasonable distance" one-way between the employee's official work station and residence shall not exceed 10 miles unless the 10-mile limitation is specifically exempted by the Secretary of Administration or the Secretary's designee. For trip vehicles assigned to a traveler under paragraph (1)(C), "reasonable distance" shall be based on the determination that driving the vehicle home will not increase the total one-way trip mileage between the official work station and the destination by more than 10 miles.
Please note that meeting the Kansas Administration Regulation requirements to commute with the state-owned vehicle does not exempt the employee from the IRS fringe benefit income reporting requirements. The employee would still need to report fringe benefit income for the commuting use of vehicle unless the vehicle qualifies as a Nonpersonal Use Vehicle or the employee's residence is designated as the employee's official work station.
Agencies shall identify and notify those employees who use state-owned vehicles and who park those vehicles overnight at their residence (commuting) that such use of the vehicle is a taxable event to the employee. The personal (commuting) use is fringe benefit income and must be valued at one of the three methods approved by the IRS. This requirement does not apply to vehicles listed in Appendix D.
Agencies shall determine and install procedures similar to the attached accounting work sheet that will record the workdays on which the vehicles were parked overnight at the employee's residence and will report the calculated gross amount of such fringe benefit income for the pay period to the payroll system. The procedure will include at a minimum the data specified in the attached Statement of Personal Usage for State Provided Vehicles (Appendix B).
Agencies shall provide the payroll system with reports and data to:
- Record fringe benefit income chargeable to each affected employee.
- Calculate and withhold from each affected employee's pay the Social Security, Medicare and retirement contributions due.
- Calculate and withhold from each affected employee's pay the federal and state income tax due.
- Calculate the employer's share of Social Security, Medicare, retirement, unemployment compensation and workers compensation contributions due.
- Remit all withheld taxes and contributions to the appropriate authorities.
- Report on each affected employee's W-2, the total fringe benefit income for the calendar year.
Attachment A: IRS Approved Methods of Reporting Fringe Benefit Income (.pdf)
Attachment B: Statement of Personal Usage for State Provided Vehicles (.pdf)
Attachment C: Daily Travel Log (.pdf)
Attachment D: Vehicles Excluded From Fringe Benefit Income Reporting Requirements (.pdf)