Personal Usage Flashcards
What are the three exemptions from personal use fringe benefits?
- Minimal use (De minimis)
- Qualified transportation commuter highway vehicle between employee’s home and workplace
- Qualified non personal use vehicles
What vehicles are considered non-personal-use vehicles?
Any vehicle the employee is not likely to use more than minimally for personal purposes because of its design.
Examples include police cars, ambulances, school buses, loaded gross vehicles weight over 14,000 lbs, and pickup trucks modified for minimal personal use (decals, company advertising).
What is the General Valuation Rule for calculating personal use?
The value of a taxable benefit is its FMV. The FMV is the amount the employee would have to pay a third party for a similar vehicle.
What are Safe-harbor Value Rules?
Alternative to the General Valuation Rule. Rules include cents per mile, commuting, and annual lease value rule.
Describe the Fleet Average Valuation Rule.
An employer with a fleet of 20 or more passenger automobiles, vans, or trucks may determine the value of the personal use by using the Fleet-Average Valuation Rule to calculate the Annual Lease Value.
Define the Cents-per-mile Safe-harbor Rule.
Calculate the value of a vehicle for personal use by multiplying the standard mileage rate by the total personal miles driven by the employee
What consistency requirements must be met when using the Cents-per-mile Rule?
- At least 50% of the vehicle’s total annual mileage is for business.
- The employer uses a commuting pool that uses the vehicle each work day to drive at least three employees to and from work.
- The vehicle is regularly used in the employer’s business.
What is the Commuting Rule, and what requirements must be met to use it?
The employer determines the vehicle value provided for commuting by multiplying each one-way commute by $1.50. This amount is included in the employee’s wages or reimbursed by the employee.
What is the Annual Lease Value Rule?
Employer determines the value of the vehicle by using its annual lease value. Prorated or daily lease value can be used for partial year.
What must be calculated in order to use the Annual Lease Value Rule?
% of personal miles out of total miles driven annually multiplied by the annual lease value.
What is the Prorated Annual Lease Value?
Multiplied by the days/months vehicle was assigned out of the year.
How is the daily lease value calculated?
Annual lease value x (days/365).
What are employee and employer responsibilities for record keeping?
Employee: maintain adequate records of business miles, purpose, and date.
Employer: obtain annual driver use statement and audit.
When is record keeping not required?
If fleet policy prohibits personal use or if the vehicle is garaged at the employer’s facility.
What are the three methods that employers can use to meet the IRS requirements of personal use fringe benefits?
- Treat all miles as personal and the employee to deduct expenses from their tax return.
- Impute income for the personal use miles by calculating the difference between starting and ending odometers and subtracting business miles.
- Require the employee to pay the employer for the value of personal use.
What vehicles do the CRA personal use tax regulations apply to?
Motor vehicles designed for use on highways and streets.
What is a Standby Charge and how is it calculated?
Based on the vehicle’s capital cost. Original cost + post-delivery capital improvements.
What is Operating Cost Benefit and how is it calculated?
Operating cost benefit is included in the employee’s income when the employer pays operating costs that relate to personal use of a company vehicle.
What vehicles are exempt from the deductibles stated above?
Vans, pickup trucks that seat no more than 3 people including the driver are exempt from the deductibility restrictions if their primary use is to transport goods and equipment.
What conditions must be met for an employee to be an on-call employee?
- Motor vehicle is especially designed or significantly modified to carry tools, equipment or merchandise and is essential in performance of employment duties.
- Vehicle is consistently used to carry and store heavy, bulky or numerous tools and equipment.
What must be documented in regards to personal use?
Mileage log for both personal and business use for the year.
