This guideline covers the tax reporting and withholding requirements applicable to the personal use of University automobiles.
Personal use of a University automobile by a University employee must be reported as taxable wages on the employee’s Form W-2. University automobiles include any automobile leased, owned, or insured by the University or by a University affiliated entity. Courtesy cars provided to athletic department coaches and staff are generally treated as University automobiles for tax purposes. Personal use includes commuting from the employee’s home to his/her regular place of work at the University and also includes any other travel not done for University business. Mileage records must be maintained to determine what portion of University automobile use is for personal purposes. The amount included in taxable wages is calculated based on a special valuation rule, “the Annual Lease Value Method” (see below).
When an automobile is provided to a University employee by a third party, such as a booster club or an automobile dealer, the University will include the automobile’s personal use on the employee’s Form W-2 if the automobile was contemplated during the employment process or was provided through an arrangement with the institution.
Mileage Record Tax Form Responsibilities
A standard mileage record tax memorandum/form is used to determine the personal portion of University automobile usage and to calculate the attendant taxable wages.
Any University employee that uses a University automobile for personal use must complete a mileage record tax form annually. It is the employee’s responsibility to maintain records necessary to permit accurate completion of the mileage record tax form. Failure to complete the mileage record form by November 15th may result in an amended Form W-2 and may result in improper income tax reporting and improper payroll tax withholding.
A senior manager designated by the Vice Chancellor for Finance and Administration is responsible for distributing blank mileage record tax forms and a copy of this policy to the appropriate employees on his/her campus, annually. The designated senior manager is also responsible for obtaining and submitting properly completed mileage record forms to the Treasurer’s Office.
The Treasurer’s Office is responsible for calculating taxable wages from the personal use of University automobiles by applying the Annual Lease Value Method to data provided in the mileage record tax forms. The Treasurer’s Office is also responsible to ensure that the results of the Annual Lease Value calculations are properly reflected in the Human Resources System and the employees’ Forms W-2.
Annual Lease Value Method
The Annual Lease Value Method uses tables which consider the lease value of the car to be approximately 25% of the car’s fair market value plus $500. Generally the fair market value of an automobile is amount that an individual would have to pay in an arm’s-length transaction to purchase the particular automobile in the jurisdiction in which the vehicle is purchased or leased.
Once calculated, the Annual Lease Value for a particular automobile generally remains in effect until the end of the fourth full calendar year following the date the rule is first applied to the automobile. If the automobile is used entirely for personal use, the entire annual lease value must be reported as wages. If the use of the automobile is part personal and part business, the annual lease value is prorated.
The annual lease value does not include any fuel furnished by the University. If fuel paid for by the University is consumed in connection with personal use, the value of the fuel is considered additional compensation. Gasoline can generally be valued at the actual cost or at 5.5 cents per mile.