Company Owned Cars The Personal Depreciation Portion
If an employer provides an employee with a vehicle and the company pays all the costs of operating the vehicle, the employee's personal use of the auto is a taxable fringe benefit. This benefit applies to the owner of the company, as well. The employer must determine the value of this fringe benefit and tax it. You may either do this in the course of the employee's regular payroll checks, or include the benefit amount as a lump sum in the last payroll of the year so that it gets included in the employee's W-2. One other way would be to determine the amount and have the employee pay back the company for the personal portion. The company would need to set up a receivable and offset it by reducing the company's auto expense deduction. This is probably the least desirable method to record the activity. But it's better than not doing anything.
Once you decide how your company will handle the procedure, it's important to be consistent in the method chosen with all employees.
If you have questions on how to calculate the personal use portion of an employee vehicle and how to do the taxes, please give us a call. We'd be glad to help.