Tax Updates: Reminder: Personal Use of Company Owned Vehicles • Deadline Extended for Avoidance of Health Coverage Penalty for Midsize Employers

March 11, 2014

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Reminder: Personal Use of Company Owned Vehicles

by Kandy L. Wischmeier - Tax Manager

One item frequently looked at and challenged by the IRS is the personal use of company owned vehicles. Personal use of a company owned vehicle is required by law to be included as income to the user. The company has or is expensing the cost of the vehicle and related expenses, therefore, any personal use is considered income to the individual.

In addition, a mileage log is required to be kept for each vehicle to track personal versus business use. This would include date, miles driven, destination and purpose. All business miles need to be documented. All other miles would be considered personal.

It is the responsibility of the company's owners and management to make their tax preparer aware of any personal use of auto situations requiring a calculation of the taxable portion. In lieu of reporting the personal use on the owner's K-1s, this amount can also be included on W-2s, providing the owner has wages. If the individual driving the vehicle isn't an owner, then the personal use is required to be reported on their W-2. Generally, this amount is added on when W-2's are prepared after year end.

Deadline Extended for Avoidance of Health Coverage Penalty for Midsize Employers

by Paul Johnston - Tax Director

The IRS recently announced that employers with 50 to 99 workers will be given until 2016 to avoid a federal penalty for noncompliance to offer health insurance to almost all their full-time employees. This extends the deadline two years beyond the original dates set by the shared responsibility provisions in the Affordable Care Act. These employers will still be required to file information about their employees and health care coverage in 2015.

Employers with 100 or more full-time workers are getting a different one-year grace period, which phases in the percentage of full-time workers requiring minimum coverage. The percentage is 70% for 2015 and 95% for 2016 and subsequent years. Employers that fall into this category that do not meet the required percentages will be required make an employer shared responsibility payment for 2015.

For further information regarding the shared responsibility provisions please reference Internal Revenue Bulletin: 2014-9 .