August 2, 2019 at 12:21 pm #2600490
So here's a situation I'm facing that I can't seem to get clarity on, and maybe some of you tax gurus might have ideas…
If XYZ Corporation gives a company vehicle to an employee, and that employee only uses the vehicle to commute to/from work, that's definitely a taxable fringe benefit and should qualify for the Commuting Rule. However, if the employee pays for all the gas, does that affect the Commuting Rule?
And before you mention reducing by 5.5 cents per mile… that's only applicable to the Cents-Per-Mile method. 🙂August 2, 2019 at 1:28 pm #2600652ReckedParticipant
Does the employee have a home office?
I don't think the rule specifies if gas is included or not included so I would assume the purchase of the fuel makes no difference to the $1.50 per trip rule.
Commuting rule for those that are curious.
Under this rule, you determine the value of a vehicle you provide to an employee for commuting use by multiplying each one-way commute (that is, from home to work or from work to home) by $1.50. If more than one employee commutes in the vehicle, this value applies to each employee. This amount must be included in the employee's wages or reimbursed by the employee.
You can use the commuting rule if all the following requirements are met.
You provide the vehicle to an employee for use in your trade or business and, for bona fide noncompensatory business reasons, you require the employee to commute in the vehicle. You will be treated as if you had met this requirement if the vehicle is generally used each workday to carry at least three employees to and from work in an employer-sponsored commuting pool.
You establish a written policy under which you don't allow the employee, nor any individual whose use would be taxable to the employee, to use the vehicle for personal purposes other than for commuting or de minimis personal use (such as a stop for a personal errand on the way between a business delivery and the employee's home). Personal use of a vehicle is all use that isn't for your trade or business.
The employee doesn't use the vehicle for personal purposes other than commuting and de minimis personal use.
If this vehicle is an automobile (any four-wheeled vehicle, such as a car, pickup truck, or van), the employee who uses it for commuting isn't a control employee. See Control employee, later.August 2, 2019 at 1:33 pm #2600664
Good question about the home office. Assuming the employee didn't have a home office, then it would be treated as discussed about the Commuting Rule. However, if the employee did have a home office, then the commute would no longer be treated as a regular commute and therefore there would no longer be the taxable fringe benefit, right?
FYI, in my particular situation the employee does not have a home office.August 2, 2019 at 1:39 pm #2600682ReckedParticipant
The home office is dancing a bit in the gray, so probably best left out of this discussion.
Can you tell me the size of the entity and whether this employee is an owner or what the deal is?
I've never had anyone use the commuting rule in real practice, but I also don't work with larger entities that provide vehicles to employees, other than owners or the like.
Is it a lease or purchased vehicle? And why is it provided to the employee?August 2, 2019 at 2:31 pm #2600802
I agree. A regular employee that commutes almost every day having a home office seems like a red flag under audit.
Entity size is fairly small, <20 employees. The discussed employee is not an owner and does not make more than the allowed limits for the Commuting Rule. It's a unique situation, and I guess the vehicle is provided to this particular employee because she drives an hour each way to work. The vehicle was bought outright by the company. I think it was sort of a perk they offered her instead of a pay raise.October 7, 2019 at 4:12 pm #2741817
I really hate some of the ambiguity around tax laws… In the Publication 15-B it states as one of the requirements for the Commuting Rule:
“You provide the vehicle to an employee for use in your
trade or business and, for bona fide noncompensatory
business reasons, you require the employee to commute
in the vehicle. You will be treated as if you had
met this requirement if the vehicle is generally used
each workday to carry at least three employees to and from work in an employer-sponsored commuting pool.”
Would an employee who drives a company vehicle to/from work exclusively (not like a sales rep or someone who uses the vehicle for a lot of other business travel) be able to be included in the Commuting Rule? Or does the above paragraph exclude that possibility?
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