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December
1, 2004 - Did
you know that
IRS
reporting
rules for personal use of an employee provided auto and
certain other benefits apply to employees of not-for-profit
organizations? The
IRS
is taking
a closer look at not-for-profit organizations’ salaries
including such taxable benefits as auto use.
Organizations will want to be sure that all gross
income is correctly and accurately reported for individual
tax purposes.
An
employee’s taxable fringe benefits are treated as wages
for withholding and other employment tax purposes.
Examples of taxable fringe benefits are
employer-provided automobiles, airplane flights, country
club memberships, and tickets to entertainment events that
do not fit into any of the statutory exclusions.
The
taxable amount of the fringe benefit is its fair market
value, less any amount the employee pays for it.
Generally, fair market value is the amount that would
be paid for the benefit between unrelated parties dealing at
arm's length. When
it comes to valuing an employee’s personal use of an
automobile supplied for business purposes any of these three
valuation methods can be used to determine the fair market
value of the personal use:
·
The
annual lease value tables provided by the
IRS
.
·
The
cents-per-mile method.
·
The
final method is the commuting method.
There
are specific requirements that must be met in order to use
the last two methods; therefore, the annual lease value
method is most commonly used.
If the annual lease value or the cents-per-mile
method is used, the employee must keep records of total
miles, personal miles and business miles.
Keeping a travel log is the best method for tracking
this information.
Failing
to report taxable fringe benefits correctly can result in
significant penalties to the employer.
Please contact Robin Fritz at
215-564-1900
if you have any questions.
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