Anyone drive a company vehicle?

[kittybeast]

my employer is now telling me that I am responsible for paying the taxes of the "income" I recieve by using a company vehicle. They are saying this 'boosts' my annual income by $5000 a year and I will be paying taxes on that income.

How does that work, they need me to drive a truck so they can have me do service calls to pick up furniture....why is this considered income? I didn't ask for it, I consider part of the job I have to do and the 'equipment" they say I need to do the job. Right now I'm upset and definately will be doing some research on this. Anyone know some Fed. tax laws that could enlighten me?

Thanks for the help. Kristy

 

[Jibrille]

In what way are you making the income due to the vehicle? I know that my company pays the expenses for mileage unless they are paying for the rental car. Because the mileage is based on the idea of being a reimbursement for what I pay for gas, it is tax free despite actually getting money out of the deal. We do have company cars but they would be taken care of in a similar way.

 

[Havermout]

Can't really tell how it works in the US, but here in Holland its like this:

If you're driving a company vehicle (and use it for private purpose as well) it will be considered as income (22% of the value of the car a year, to be raised to 25% next year). So we have to pay taxes over this 22%. Its a lot of money but still cheaper as having a private car instead. And yep, i drive a company car since 3 years now.

Its clear that truckdrivers do not use it for private purposes since they will leave their car at the company but for drivers of regular cars who do not use this private will have to keep administration of the miles they are driving for the company (and not private) to avoid additional taxes on their paycheck.

H.

 

[Pellaz]

my employer is now telling me that I am responsible for paying the taxes of the "income" I recieve by using a company vehicle. They are saying this 'boosts' my annual income by $5000 a year and I will be paying taxes on that income.

How does that work, they need me to drive a truck so they can have me do service calls to pick up furniture....why is this considered income? I didn't ask for it, I consider part of the job I have to do and the 'equipment" they say I need to do the job. Right now I'm upset and definately will be doing some research on this. Anyone know some Fed. tax laws that could enlighten me?

Thanks for the help. Kristy

Try browsing the publications at www.irs.gov. If all else fails, call 1-800-TAX-FORM and request a copy of Publication 17. It covers all aspects of filing a Form 1040 in reasonably clear language. You could opt to read it online as a pdf, but it's a pretty handy book. (Yeah, it's more a small book than, say, a pamphlet.)

 

[kellsco]

I'm sure if you call the IRS they can hook you up with someone that can talk to you about this. If not, maybe call a CPA that specializes in tax preparation. Or some place like HR Block or the like.

Best of luck on this Kristy. I know I'd be very upset about this as well. Have you worked for the business for long ....and this is the first year they have told you this?

 

[kittybeast]

Best of luck on this Kristy. I know I'd be very upset about this as well. Have you worked for the business for long ....and this is the first year they have told you this?

My biggest worry is that their tax guy is going to try and make it retro for the last 8 years....I won't pay...sorry they'll have to up my end of year bonus.

I work for my husband's family.... all of the family are owners of the business except me and my husband. They all have 2 company cars each... I had a car when I moved here. After 2 years they said..hey you want Michaels old truck, we'll give it to you as a company car and give you a company gas card.

This truck is used 5 days a week for work and it is used for personal as well.

Thank you all for the help and links....I'm at work and it sure didn't start out very nice today. You guys are the greatest!!!

 

[Cheiron]

That's actually incorrect. Its only if you are also using that truck for personal use (such as taking your kids to soccer practice). If you are, then you have to pay taxes on it, and figuring that out isn't easy. But its not just '$5000' income.


Read this to figure it all out - http://www.normanjohnsoncpa.com/fft/personaluse.htm

 

[ashaman7122]

My biggest worry is that their tax guy is going to try and make it retro for the last 8 years....I won't pay...sorry they'll have to up my end of year bonus.

I work for my husband's family.... all of the family are owners of the business except me and my husband. They all have 2 company cars each... I had a car when I moved here. After 2 years they said..hey you want Michaels old truck, we'll give it to you as a company car and give you a company gas card.

This truck is used 5 days a week for work and it is used for personal as well.

Thank you all for the help and links....I'm at work and it sure didn't start out very nice today. You guys are the greatest!!!

Whether they are family or not, I don't think your employer has the right to dictate how you pay your taxes...that's between you, your CPA (if applicable), and the IRS. Unless they pay you some sort of vehicle allowance, which they are going to begin taxing, I don't see how any of this applies to your employer, unless they're going to begin taxing you additionally on your existing income to "make up" for this in their eyes...

Something in this whole thing doesn't quite cut it...definitely worth looking into...

 

[J-Man]

As far as using a company vehicle, there is no way in hell you have to pay taxes on the vehicle for income generated by said vehicle. Reason for this is that there is a depreciation on said vehicle, and the company is responsible for any taxes on income generated. At least that is the way our company does it, and we have lots of company vehicles and a few company jets also.

 

[kittybeast]

Thanks again guys you're all fantastic people and I can't wait to see ya all again!!

I looked into a bit on irs board and whew! that is not some easy stuff to figure out. It is a company vehicle (owned by CFG), they pay the registration, insurance and maintain the vehicle. I have a company gas card as well. I do drive the car on my day off, it's my only vehicle. It seems the IRS deems this a fringe benefit and they can add in the cost of this to my income as a 'benefit' and it does make me have to pay taxes on that extra 'income'.

from the IRS :Wages subject to Federal taxes generally include all pay that you give to an employee for services performed. This pay may be in cash or other forms. It included salaries,non qualified deferred compensation recognized under section 409A, vacation allowances, bonuses, commissions, and fringe benefits. http://www.irs.gov/pub/irs-pdf/p15.pdf

As long as they don't try to tax me for the past years, I'll figure it out. Thanks again for all the help, links and support!

 

[kittybeast]

Read this to figure it all out - http://www.normanjohnsoncpa.com/fft/personaluse.htm

excellent link! much better than trying to read the gov. doc.

 

[kellsco]

I looked into a bit on irs board and whew! that is not some easy stuff to figure out. It is a company vehicle (owned by CFG), they pay the registration, insurance and maintain the vehicle. I have a company gas card as well. I do drive the car on my day off, it's my only vehicle. It seems the IRS deems this a fringe benefit and they can add in the cost of this to my income as a 'benefit' and it does make me have to pay taxes on that extra 'income'.

You'll have to start doing what I do with my personal car that I use sometimes for business. I have a little retail thing out of my house. At tax time I have to list the total mileage on the car for the year, then I list the miles driven for my business. That gives me the % of business use. That is the % that I can claim for insurance, gas, tires, oil changes and other car work done, registration and testing fees, etc.

You won't have to get into all that, but you will most likely have to keep a nice little mileage log and use it every day. Then you can break down exactly what % of your time in the truck is used for personal use. That way you only pay taxes only on the times you used it, and not what someone, or you, guessed that time is. I guess this deal for you would work like that. I don't know, but it makes sense to me.

It seems you are feeling better than you were when you first got this news, now that things seem somewhat clearer. I'm glad!

 

[Kaosaur]

I think they can only go back as far as 5 years for the taxes, as that's all they can go back to the IRS for for their rebate. I hope they don't do that to you though.

 

[Michael TEOF]

my employer is now telling me that I am responsible for paying the taxes of the "income" I recieve by using a company vehicle. They are saying this 'boosts' my annual income by $5000 a year and I will be paying taxes on that income.

How does that work, they need me to drive a truck so they can have me do service calls to pick up furniture....why is this considered income? I didn't ask for it, I consider part of the job I have to do and the 'equipment" they say I need to do the job. Right now I'm upset and definately will be doing some research on this. Anyone know some Fed. tax laws that could enlighten me?

Thanks for the help. Kristy

It's called imputed income and it's a modern concept developed by the IRS. Imputed means something you could have had but didn't get (i.e. car expenses you should have if you had to drive to work but do not).

The feds can not only tax income you receive but also potential income. It's based on the premise that you don't work hard for your living but that the government builds the foundation for you to make a living. Taxes are you "giving back" to the society which gave you the opportunity to afford such luxuries to begin with.

Your company provides you with transportation. If it weren't for that transportation provided by your company, you'd have to spend extra maintanence and fuel on your vehicle or perhaps even car payments that tally up to a certain ammount. They've determined its 5,000 dollars. Because you don't have to pay that 5,000 dollars, you owe it in taxes to the government. After all, it's not fair for you to have free transportation and you need to give back.

It doesn't stop there. If you own multiple properties and are not renting them out or living in them, you can be taxed on the imputed income you might receive if you were renting them. It doesn't matter if you actually rent the properties. The government collects taxes on imputed income.

A famous case of imputed taxation was about the guy who caught Barry Bond's record breaking home run. He was forced to sell his baseball. Why? Because if he didn't sell it, the feds were going tax him based on the imputed income he would receive if he decided to sell it.

If all this angers you, it should. Taking away imputed income taxation is lumped in with "tax cuts for the rich."

The Michael

 

[Pellaz]

I think they can only go back as far as 5 years for the taxes, as that's all they can go back to the IRS for for their rebate. I hope they don't do that to you though.

Three years, not five, for previously filed returns. IRS does have ten years after any assessment to collect the tax, though.

Your company provides you with transportation. If it weren't for that transportation provided by your company, you'd have to spend extra maintanence and fuel on your vehicle or perhaps even car payments that tally up to a certain ammount. They've determined its 5,000 dollars. Because you don't have to pay that 5,000 dollars, you owe it in taxes to the government. After all, it's not fair for you to have free transportation and you need to give back.

Happily, she would only have to pay tax on that portion of the vehicle's usage that was used for personal (not business) use.

$5,000 sounds awfully high, too. Sounds like someone's padding their business deductions.

A famous case of imputed taxation was about the guy who caught Barry Bond's record breaking home run. He was forced to sell his baseball. Why? Because if he didn't sell it, the feds were going tax him based on the imputed income he would receive if he decided to sell it.

Can you cite a news source for this?

 

[Michael TEOF]

Can you cite a news source for this?

It was awhile back and a major news story. I consider it public knowledge. Why should I have to google it to prove that it happened? You can do that if you want .

Makes an interesting law exam question though:

http://blogs.wsj.com/law/2007/07/25/tax-law-final-exam-question-barry-bondss-ball/ It's too bad there are quite a few "I want to be Mr. Modern Day JFK"s in law school who would sadly argue taxing imputed income is an acceptable and legal practice . After all, we don't make money... society allows for us to profit. Society deserves its take of our assets. How dare we question that premise.

The Michael

 

[Pellaz]

“In an attempt to appear completely patriotic and magnanimous, IRS Commissioner Charles O. Rossotti said last Tuesday that no gift tax will be charged to the person who returns McGwire’s ball to the ballplayer. The foundation for this statement came from a decision to compare the act of returning McGwire’s ball to the act of declining a prize. Rossotti stated that, “This conclusion is based on an analogy to principles of tax law that apply when someone immediately declines a prize or returns unsolicited merchandise. There would likewise be no gift tax in these circumstances.”

If Rossotti says it, you can take it to the bank. Or not, in this case.

I liked the analogy later in that thread. The fan who catches the ball has received a gift of....a baseball. Worth a few dollars. It can't be sold for full value until it's appraised, so if the fan sells it for $500,000 after the appraisal, he has to pay tax on the gain ($500,000 less a few bucks).

On the other hand, it could be considered a gift from Barry Bonds, so HE has to pay the gift tax on it.

 

[Greykiller]

My accountant made me keep a record of miles traveled for work and then for personal business. He was then able to calculate how much the company SHOULD be charging me to use their property. If it is you vs your company on a matter like this, the entity with the good records will win.

On a related matter, if you do not have a CPA (NOT H&R Block--I used them twice and the horrorible service pushed me right into the arms of a competent CPA) doing your taxes, you might want to consider doing so. The 200 bucks mine charges me saves me the time and hassle of having to do them myself, he finds deductions I never knew existed, and will back me up in case of an audit. Plus, the 200 bucks is a deduction for next year so it all comes out in the good.

 

[kittybeast]

yeah, this year I will go to a tax guy. What I found out yesterday is that we all are getting $3000.00 added in as a fringe benefits for driving company vehicles... I said "how can the be, from what I've read it's based on the fair market value of the car and how much I use it for personal use." How can a 2006 Jaguar, a 2007 Lincoln Navigator and a 2006 Mercedes SLK 350 be the same as my 1997 Explorer.? I've asked them to check with their accountant as this surely does not seem correct. Where it all gets tough again is that I am related to them and sometimes they get a bit pissy about things but that surely is no reason I should be taxed more than was the I.R.S. says is policy.

Thanks again ya'll for your help.

 

[Greykiller]

yeah, this year I will go to a tax guy. What I found out yesterday is that we all are getting $3000.00 added in as a fringe benefits for driving company vehicles... I said "how can the be, from what I've read it's based on the fair market value of the car and how much I use it for personal use." How can a 2006 Jaguar, a 2007 Lincoln Navigator and a 2006 Mercedes SLK 350 be the same as my 1997 Explorer.? I've asked them to check with their accountant as this surely does not seem correct. Where it all gets tough again is that I am related to them and sometimes they get a bit pissy about things but that surely is no reason I should be taxed more than was the I.R.S. says is policy.

Thanks again ya'll for your help.

They might be basing it on the amount of money per mile they can charge you. In my personal business I think I write off 43 cents per mile for my car, but it does not matter what car I drive for the deduction. Hence the Jag and your truck end up with the same "income" adjustment.

Having them charge the same money across the board should only happen if you all drive the exact same mileage, IMO.