YEAR END REPORTING

Personal Use of Company Auto

Your employees’ pay must include the value of fringe benefits you provide, unless the benefits are specifically excluded from income by law or are paid for by the employees. The value of these includable fringe benefits is generally subject to Social Security and Medicare Tax (FICA), Federal and state unemployment taxes (FUTA and SUTA), and income tax withholdings.

Personal Use of Company Auto

If you provide automobiles to your employees for use in your trade or business and the employees also incur some personal use of the vehicle (including commuting), the value of the personal use is considered a taxable fringe benefit and generally should be included as gross pay in their W-2 earnings.

Your company must withhold taxes either quarterly, semiannually or on any other pay period basis, but not less often than annually. The employer can elect not to withhold income taxes on the value of personal use of a vehicle included in an employee’s income if:

• the employer gives the employee advance written notice that this election will be made; and
• the employer includes the taxable amount of the benefit in the employee’s income reported on Form W-2.

The election only applies to federal and state withholdings, not FICA. The employer must provide the advance notice to the employee by the later of January 31 of the year for which the election is to apply, or within 30 days after the employer first provides a vehicle to the employee.