Personal Usage

Question 1

What are some of the main differences between Canada and the US?

Answer 1

See table.

Question 2

What are the three exemptions from personal use fringe benefits?

Answer 2

• Minimal use (De minimis)
• Qualified transportation commuter highway vehicle between employee’s home and workplace
• Qualified non personal use vehicles

Question 3

What vehicles are considered non-personal-use vehicles?

Answer 3

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).

Question 4

What is the General Valuation Rule for calculating personal use?

Answer 4

The value of a fringe benefit is its FMV. The FMV is the amount the employee would have to pay a third party for a similar vehicle.

Question 5

What are Safe-harbor Value Rules?

Answer 5

Alternative to the General Valuation Rule. Rules include cents per mile, commuting, and annual lease value rule.

Question 6

Describe the Fleet Average Valuation Rule.

Answer 6

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.

Question 7

Define the Cents-per-mile Safe-harbor Rule.

Answer 7

The employer determines the value of a vehicle provided to an employee for personal use by multiplying the standard mileage rate by the total miles the employee drives the vehicle for personal purposes.

Question 8

What consistency requirements must be met when using the Cents-per-mile Rule?

Answer 8

• At least 50% of the vehicle’s total annual mileage is for the employer’s trade or business.
• The employer sponsors a commuting pool that generally 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.

Question 9

What is the Commuting Rule, and what requirements must be met to use it?

Answer 9

The employer determines the vehicle value provided for commuting use by multiplying each one-way commute by $1.50. This amount is included in the employee’s wages or reimbursed by the employee.

Question 10

What is the Annual Lease Value Rule?

Answer 10

Employer determines the value of the vehicle provided by using its annual lease value. Prorated or daily lease value can be used for partial year.

Question 11

What must be calculated in order to use the Annual Lease Value Rule?

Answer 11

% of personal miles out of total miles driven annually multiplied by the annual lease value.

Question 12

What is the Prorated Annual Lease Value?

Answer 12

Multiplied by the days/months vehicle was assigned out of the year.

Question 13

How is the daily lease value calculated?

Answer 13

Annual lease value x (days/365).

Question 14

What are employee and employer responsibilities for record keeping?

Answer 14

Employee: maintain adequate records of business miles, purpose, and date.
Employer: obtain annual driver use statement and audit.

Question 15

When is record keeping not required?

Answer 15

If fleet policy prohibits personal use or if the vehicle is garaged at the employer’s facility.

Question 16

What are the three methods that employers can use to meet the IRS requirements of personal use fringe benefits?

Answer 16

• Treat all miles as personal and the employee to deduct expenses from the employee’s tax return.
• Impute income for the personal use miles determined 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.

Question 17

What vehicles do the CRA personal use tax regulations apply to?

Answer 17

Motor vehicles designed for use on highways and streets.

Question 18

What is a Standby Charge and how is it calculated?

Answer 18

Based on the vehicle’s capital cost. Original cost + post-delivery capital improvements.

Question 19

What is Operating Cost Benefit and how is it calculated?

Answer 19

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.

Question 20

What vehicles are exempt from the deductibles stated above?

Answer 20

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.

Question 21

What conditions must be met for an employee to be an on-call employee?

Answer 21

• 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.

Question 22

What must be documented in regards to personal use?

Answer 22

Mileage log for both personal and business use for the year.