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I have a client who provides a company owned vehicle to one

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I have a client who provides a company owned vehicle to one of its employees. The personal use amount for inclusion on this employee's W-2 has been based on the commuting mileage method. A Company policy statement exists stating that the employee is required to have the car and is not allowed to use it for personal purposes. The employee has signed such an agreement. An IRS auditor has said that the employee must maintain a mileage log anyway, to show that no personal use other than commuting, exists. Is this required under the commuting mileage method? The Company also pays the gas related to the commuting miles. What amount should be used to value the fuel used for inclusion on the employee's W-2.
Submitted: 5 years ago.
Category: Tax
Expert:  CGCPA replied 5 years ago.

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Although it is not specifically stated that a mileage log be maintained, the following extract from the IRS rules does require that the vehicles use be determinable. To properly accomplish this, a mileage log should be maintained. This will substantiate the "no personal use" requirement of the agreement between the employer and the employee. It will also substantiate appropriate business use of this vehicle. Here is the extract from the IRS. It also states a specific value to be used for each commute rather than requiring fuel use as a part of the equation.


Under this rule, you determine the value of a vehicle you provide to an
employee for commuting use by multiplying each one-way commute (that is, from
home to work or from work to home) by $1.50. If more than one employee commutes
in the vehicle, this value applies to each employee. This amount must be
included in the employee's wages or reimbursed by the employee.

You can use the commuting rule if all the following requirements are met.

  • You provide the vehicle to an employee for use in your trade or business and,
    for bona fide noncompensatory business reasons, you require the employee to
    commute in the vehicle. You will be treated as if you had met this requirement
    if the vehicle is generally used each workday to carry at least three employees
    to and from work in an employer
    sponsored commuting pool.

  • You establish a written policy under which you do not allow the employee to
    use the vehicle for personal purposes other than for commuting or de minimis personal use (such as a stop for a
    personal errand on the way between a business delivery and the employee's home).
    Personal use of a vehicle is all use that is not for your trade or business.

  • The employee does not use the vehicle for personal purposes other than
    commuting and de minimis personal use.

  • If this vehicle is an automobile (any four-wheeled vehicle, such as a car,
    pickup truck, or van), the employee who uses it for commuting is not a control

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