Vehicle & Parking Expenses

 

Description

For the primary purpose of conducting university business, employees in designated positions are authorized (but not required) by POL 05.15.03 for Non-Salary and Deferred Compensation, to receive one leased vehicle, courtesy vehicle, or vehicle allowance (including associated vehicle insurance, vehicle tax expenses, and campus parking permits, if any) as resources allow.  Any personal use of such vehicles must be reported and is considered taxable income.  Vehicle and related expenses for positions not designated by policy, must be authorized in advance on a case-by-case basis by the Board of Trustees.  The Non-Salary Compensation Form must be completed, approved and submitted prior to payment.  The payment method, taxation and record keeping may differ based upon the type of vehicle arrangement and related expenses.

Definition, Leased Vehicles

A vehicle that is leased by a department from a dealership and assigned to an employee. Mileage requires documentation to substantiate business use and differentiate personal miles; personal miles are considered taxable non-salary compensation.

Taxation of Payment

Personal miles in the leased vehicle are considered taxable non-salary compensation and included in the grosses for social security, Medicare, federal, and state tax reporting. Social security (OASDI) and Medicare taxes (Fed-Med) are withheld on the paycheck.

Responsible People

Employee: The employee is responsible for providing their department each quarter:

  • The total mileage driven including the starting and ending mileage of the leased vehicle’s odometer;
  • A mileage log of business travel. The mileage log entries should contain date of trip, business destination, business purpose, and total miles of trip.
  • Note: Commuting mileage is not business travel. It is personal use and taxable.

College or Department: The department must retain records associated with the leased vehicle and the mileage logs submitted by employee. They must provide University Payroll with the following information, on a quarterly schedule (see schedule below):

  • Copy of the lease agreement that shows fair market value, when the employee takes possession of the vehicle;
  • Employee Information (Special note – submit immediately if employee terminates):
    • Name
    • Employee ID Number
    • Inclusive Dates (i.e. February 1, 20XX to April 30, 20XX)
    • Total number of miles driven for personal useDollar amount to be taxed, calculated as follows:Calculate the personal use percentage by subtracting the business miles in the mileage log from the total miles for the quarter. The difference is the personal mileage. Divide the personal miles by the total miles for the quarter to determine personal use percentage.

Example

Total number of miles driven for the quarter 3,000
Total number of personal miles 750
Percentage driven for personal use 25%

University Payroll will provide annual and quarterly lease values of the vehicle. In addition to the calculated lease value, University Payroll will provide the time period the current lease value is valid. The quarterly lease value is obtained by dividing the annual lease value by 4.

Example continues:

Annual Lease Value $9,150.00
Divide by 4 to get Quarterly Lease Value $2,287.50

Multiply quarterly lease value by personal use percentage to determine taxable amount.

Example continues:

Quarterly Lease Value $2,287.50
Multiply by Personal Use Percentage 25%
Dollar Amount to be taxed for the Quarter $571.88

Quarterly Reporting Schedule

November – January Due by February 5th
February – April Due by May 5th
May – July Due by August 5th
August – October Due by November 5th

Note: If information is not provided for an employee for a quarter, the entire quarterly lease value will be taxed on the next payroll. Adjustments will not be made if reported at a later date.

University Controller’s Office: The University Controller’s Office will only process lease vehicle payments assigned to individuals authorized by policy or approved as an exception by the Board of Trustees. A copy of the approved Non-Salary Compensation form should be submitted to support the entry in the Financials System, if the payment is for an exception.

University Payroll: University Payroll will use the fair market value of the vehicle to determine the annual lease value as outlined in IRS Publication 15B, Employer’s Tax Guide To Fringe Benefits; and, provide the annual and quarterly value to the department for their calculations.Using earnings code VL1, Vehicle Leased, University Payroll will add the calculated value of the personal use amount provided by the department each quarter to the employee’s paycheck and collect applicable taxes.

Definition, Courtesy Vehicles

A vehicle sponsored by a car dealership that is loaned to a department and assigned to an employee. Determination of the taxable compensation is based on the Fair Market Value of the vehicle in the year it is first put into service. Mileage of the courtesy vehicle requires documentation to substantiate business use and differentiate personal miles.

Taxation of Payment

Personal miles in the courtesy vehicle are considered taxable non-salary compensation and included in the grosses for social security, Medicare, federal, and state tax reporting. Social security (OASDI) and Medicare (Fed-Med) taxes are withheld on the paycheck.

 

Responsible People

Employee: The employee is responsible for providing their department each quarter:

  • The total mileage driven including the starting and ending mileage of the courtesy vehicle’s odometer;
  • A mileage log of business travel. The mileage log entries should contain date of trip, business destination, business purpose, and total miles of the trip. Note: Commuting mileage is not business travel. It is personal use and taxable.

College or Department: The department must retain records associated with the courtesy vehicle and the mileage logs submitted by employee. They must provide University Payroll with the following information, on a quarterly schedule (see schedule below):

  • For vehicles with the Fair Market Value (FMV) below the maximum automobile value for the year as specified by the IRS may use the “ cents per mile” rule. The number of personal miles multiplied by the standard mileage rate set by the IRS calculates the amount subject to taxes by the employee.Copy of the contract from the loaning car dealership that shows the fair market value
    Employee Information to be reported (Special note – submit immediately if employee terminates):
    1. Name
    2. Employee ID Number
    3. Inclusive Dates (i.e. February 1, 20XX to April 30, 20XX)
  • Dollar amount to be taxed based on personal miles X standard mileage rate. If vehicle’s FMV exceeds the IRS-set maximum, the college or department must determine the taxable compensation using the leased vehicle method, listed above.
  • Quarterly Reporting Schedule
    November – January Due by February 5th
    February – April Due by May 5th
    May – July Due by August 5th
    August – October Due by November 5th

    Note: If information is not provided for an employee for a quarter, the entire quarterly lease value will be taxed on the next payroll. Adjustments will not be made if reported at a later date.

University Controller’s Office: The University Controller’s Office will reimburse courtesy car-related expenses only to employees who are authorized by policy or approved as an exception by the Board of Trustees. A copy of the approved Non-Salary Compensation form should be submitted to support the entry in the Financials System, if the payment is for an exception.

University Payroll: University Payroll will use provide the following information to the department for their quarterly calculations:

  • The maximum automobile value established by the IRS;
  • The standard mileage rate to use when following the “cents per mile rule;
  • If the FMV of the vehicle exceeds the IRS-set maximum, then an annual lease value will be calculated as outlined in IRS Publication 15B, Employer’s Tax Guide To Fringe Benefits;Using earnings code VC1, Vehicle Courtesy, University Payroll will add the calculated value of the personal use amount provided by the department each quarter to the employee’s paycheck and collect applicable taxes.

Definition, Vehicle Allowance

A set cash allowance paid to an employee each month to cover expenses related to the use of his/her personal vehicle for business purposes.

Taxation of Payment

The entire allowance is paid as cash on the employee’s paycheck and thus, is subject to all tax withholding – social security (OASDI), Medicare (Fed-Med), federal and state taxes. The federal and state income taxes are calculated using the annualized method, not the supplemental rates.

Responsible People

Employee: The employee has no responsibility of reporting mileage to the University, since the entire amount is taxable.Note: If the employee wishes to claim any portion of the vehicle allowance as a business expense on their tax return, they will need to follow the instructions outlined in IRS Publication 463, Travel, Entertainment, Gift, and Car Expenses; and, Inst. 2106, Instructions for Form 2106, Employee Business Expenses.

College or Department: This allowance must be entered by the college or department into the Time & Labor module of the HR System using the earnings/Time Reporting Code (TRC) of VA1, Vehicle Allowance. Data entry is subject to the same deadline as all other supplemental payments. Departments may generate this allowance on a monthly basis, but no less frequently than quarterly.

University Payroll: As part of regular payroll cycle processing, University Payroll will pull these entries for payment. The vehicle allowance will appear on the employee’s paycheck as VA1, Veh Allow (Vehicle Allowance).