Automobile fringe benefits can be a bit tricky to understand, but they are an essential part of employee compensation that employers must report accurately. Here's an easy-to-understand guide on what automobile fringe benefits entail, who they apply to, and the information needed to calculate the benefit amount.

Who Does It Apply To?

Automobile fringe benefits generally apply to any employee who uses a company-provided vehicle for personal use. This includes:

• Executives: High-level employees often have access to company cars.
• Sales Personnel: Employees whose job requires them to travel frequently might use a company car for both work and personal reasons.
• Any Employee with Access: Even if the car is primarily for business use, any personal use triggers the fringe benefit reporting requirement.

Information Needed for Calculation

To accurately calculate the fringe benefit amount for automobile use, you'll need the following information:

• Fair Market Value (FMV) of the Vehicle: Determine the value of the vehicle at the time it is made available to the employee.
• Personal Use Mileage: Calculate the miles driven for personal use versus business use. A reliable log or mileage tracker is essential.
• Total Annual Mileage: Total miles driven over the year, which helps in prorating the personal use part.
• Lease Value Inclusion Amount: Use an IRS-provided table to find the annual lease value based on the FMV of the vehicle.
• Employee Contributions: Any amounts the employee contributes for personal use reduce the reportable fringe benefit amount.

Practical Steps

To manage the reporting of automobile fringe benefits effectively:

1. Maintain Detailed Records: Keep thorough records of business versus personal use to ensure accurate reporting. A mileage log maintained on each vehicle throughout the year will help.
2. Communicate Guidelines: Clearly communicate the rules and expectations regarding vehicle use to employees.
3. Information Reporting: Calculate the value of the benefit annually at the same time each year and include the amount in the employee payroll.
4. Use IRS Guidelines: Refer to IRS Publication 15-B for detailed instructions on how to calculate and report the fringe benefit amounts.

Understanding and accurately reporting automobile fringe benefits is crucial for compliance and financial accuracy. With the right information and careful record-keeping, you can handle this aspect of employee compensation efficiently. Contact us for your annual worksheet to make sure this gets reported for your company. Happy Driving!