Detailing Transportation Fringe Benefits Presented live on Wednesday, March 28, 2018

Transcription

1 Detailing Transportation Fringe Benefits Presented live on Wednesday, March 28, The Payroll Advisor

2 2016 The Payroll Advisor 2

3 Housekeeping Credit Questions Today s topic Speaker 2016 The Payroll Advisor 3

4 To earn RCH credit for live presentation you must Stay on the webinar, online for the full 60 minutes Be watching using your unique URL Program code delivered by , to registered , by Apr The Payroll Advisor 4

5 Our Focus for Today v Section 132 Transportation Fringe Benefits v Paying and taxing auto allowances correctly v Calculating Personal Use of Company Vehicle v Calculating Personal Use of a Company Aircraft 2018 The Payroll Advisor 5

6 2018 The Payroll Advisor 6

7 What the Future May Hold u Rather than repeal tax-free status of other fringe benefits it shifts the tax burden to employers by reducing or repealing the business deduction for the benefits listed below: 2018 The Payroll Advisor 7

8 Tax Cuts and Jobs Act of 2017 v Publication 15-B states that the taxation does not change for the benefits v However, the employer does not get the deduction on their corporate taxes v May require additional tracking by payroll v Business may decide to preserve the deduction by taxing as wages if needed v Caution: some states/cities require that you offer transportation fringe benefits in cafeteria or nontaxable plan 2018 The Payroll Advisor 8

9 Section 132 Transportation Fringe Benefits 9 v Benefits provided to employees for their personal transportation such as commuting to and from work v 2 categories v De minimis transportation benefits v Qualified transportation benefits 2017 The Payroll Advisor

10 De Minimis Transportation Benefit 10 v Transportation benefit that has so little value that accounting is impractical v Must be occasional-reasonable-not based on hours worked v Value excluded from wages v Example: occasional fare given to employee who is working late 2017 The Payroll Advisor

11 Transportation Fringe Benefits Local commuting transportation fare provided to an employee by an employer on an occasional basis and to enable to the employee to work overtime may be excluded as a de minimis fringe benefit 2018 The Payroll Advisor 11

12 Unusual Circumstances and Unsafe Conditions v v v Local transportation for commuting provided to an employee by an employer because of unusual circumstances and unsafe conditions is taxable to the employee as wages at the rate of $1.50 each way Any additional value is excludable Unusual circumstances include such times as when an employee is temporarily working outside his normal hours or has a shift change 2018 The Payroll Advisor 12

13 Unusual Circumstances and Unsafe Conditions v v v Unsafe conditions determined by a history of crime in the geographic area surround the employee s workplace or residence and the time of day during which the employee must commute Must be a qualified employee to use this special rule: paid hourly, <$120,000/year, subject to OT Must have certain conditions met to use this rule v v Walks or uses public transportation for commuting Transportation only for commuting for unsafe reasons 2018 The Payroll Advisor 13

14 Qualified Transportation Fringe Applies to: Benefit 1. A ride in a commuter highway vehicle between the employee s home and work place 2. A transit pass 3. Qualified parking Exclusion applies whether you provide only one or a combination of these benefits 2018 The Payroll Advisor 14

15 Providing Benefits v Can be provided directly by employer or through reimbursement arrangement vvoucher or similar item not available? Can do cash in that type of instance v If value is over limit then include amount over limit in wages 2018 The Payroll Advisor 15

16 Transit Passes v Any pass, token, farecard, voucher or similar item entitling a person to ride on mass transit and includes bus, rail or ferry v May be publically or privately provided v $260 per month may be excluded from wages v States may be different 2018 The Payroll Advisor 16

17 Transit Passes v If sold at discount the discounted price rather than the face amount can be used to determine the exclusion so long as discounted price is available to the public v Example: 10 tickets cost $17.50 if purchased separately but are sold in a packet of 10 for $15. This is offered to the general public so $15 counts against the annual or monthly minimum exclusion 2018 The Payroll Advisor 17

18 Transit Passes 18 u u u Use of electronic media to provide tax-free transportation fringe benefits. The IRS issued a revenue ruling in 2006 (Rev Rul , IRB 911), which was not effective until Jan. 1, 2012, that explains how employers can use smart cards or debit cards to provide excluded transportation fringes to employees with a minimum of paperwork. Under the ruling, the following situations are acceptable ways to set up a simplified transit pass reimbursement system that will be tax-free for income, payroll, and withholding taxes: A transit system's smart cards are plastic cards that store certain information including the card's serial number and the value of the fare media stored on the card. The amount stored as fare media on the smart card can't be used to buy anything other than fare media for the transit system. The employer makes monthly payments to the transit system for its employees who participate in the transportation benefit program, which the transit system then electronically allocates to each employee's smart card as instructed by the employer. A company provides debit cards that are restricted for use only at merchant terminals at points of sale at which only fare media for the city transit system is sold. The employer makes monthly payments to the company on behalf of its employees who participate in the transportation benefit program, which the company then electronically allocates to each employee's terminal-restricted debit card as instructed by the employer [Rev Rul , IRB 911]. Observation. In each of the above situations, assuming the amount "loaded" on the smart card or debit card does not exceed the monthly maximum (e.g., $255 per month for the 2016 and 2017 tax years), the fringe benefit is excluded even though employees aren't required to substantiate their use of the cards. That's because the cards can only be used to buy transit system rides The Payroll Advisor

19 Transit Passes v No substantiation requirements if the employer distributes the transit passes themselves v Cash reimbursements are only nontaxable if no voucher or similar item is readily available for direct distribution to employees v Example 1: Fred buys a transit pass for $100 each month. At the end of the month he presents it to his employer and is reimbursed the $100 bona fide reimbursement arrangement and is excluded from income 2018 The Payroll Advisor 19

20 Transit Passes Example 2: Larry purchases a monthly transit pass for $100 but presents it to the employer at the beginning of the month. He certifies he purchased it and will use it during the month. The employer reimburses Larry at the time he presents the transit pass. Bona fide reimbursement arrangement is established and the reimbursement is excluded from income 2018 The Payroll Advisor 20

21 The States u21 States may follow federal or not for example: u CA: California does not conform to the transit pass provision in the Tax Increase Prevention Act of 2014,'' which retroactively increased the monthly amount from $130 to $250 for However, these benefits are excluded from California gross income (ridesharing) and there are no monthly limits for the exclusion. u MA: $135 per month for transit passes for The Payroll Advisor

22 Qualified Parking v Parking provided to employees on or near employer s business premises v Includes parking on or near location where employees commute using mass transit or car pools v $260 per month 2018 The Payroll Advisor 22

23 Commuter Highway Vehicle v Seats at least 6 adults not including driver v 80% of mileage for commuting v Employees in at least half the seats 2018 The Payroll Advisor 23

24 Bicycle Commuting v No longer tax exempt under new tax bill The Payroll Advisor

25 Auto Reimbursements v Falls under Per Diems and Accountable Plans v 2018 per diem rate: 54.5 cents per mile v Under an accountable plan you: 1. Must have a log 2. Must list all requirements 1. Nature of trip 2. Actual Mileage v Auto allowances fall under same rule 2018 The Payroll Advisor 25

26 Business Use Personal Vehicle v Acme Tile Company has 20 employees on its sales staff v Each sales person must call on 20 to 30 customers per week v Sales staff uses their own personal vehicles to make these calls v Paid $500 per month on 15 th of the previous month thru A/P 2018 The Payroll Advisor 26

27 Business Use Personal Vehicle Example 1 John Levy July he submits his auto log for the month of June. John logged 1,384.9 miles. # of miles times current per diem rate or Using the 2018 IRS standard mileage rate of 54.5 cents, his calculation would be done as follows: 1,268.8 x $.545 = $ Since $ exceeds the $500 payment, nothing needs to be reported to payroll The Payroll Advisor 27

28 Business Use Personal Vehicle 2 nd Example 2 Joe Bumble July he also submits his log. But Joe spent the majority of his time in June at Acme s two biggest The total mileage for his log is only miles. But his payment exceeded the federal limits as we show the calculation as follows: x $.545 = $ Since $ is less than the monthly payment of $500, the difference will be taxable to the employee. Therefore, accounts payable must submit $ ($ $175.82) to the payroll department as taxable income for July The Payroll Advisor 28

29 Example 3: Totally Taxable v Acme does not require its sales staff to submit logs or any backup for the auto allowance that is paid each month v That is a nonaccountable plan under IRS rules no paperwork v Therefore the entire $500 per each sales staff member is taxable income for that month and must be reported to payroll 2018 The Payroll Advisor 29

30 Personal Use of a Company Vehicle v Fully taxable v Vehicle may qualify as nontaxable v 4 methods of determining taxation v General Valuation vannual Lease Value vcents per mile vcommuting 2018 The Payroll Advisor 30

31 Nontaxable Vehicles v Working condition fringe v De minimis benefit v Qualified non-personal use vehicle v Special rules for auto dealerships 2018 The Payroll Advisor 31

32 Valuing the Vehicle v Fair Market Value (FMV) determined as the price a person pays to purchase the vehicle at an arm s length transaction v Used car may use Blue Book v Fleet averaging is available if 20 cars or more v Leased cars are valued by either the manufacturer s suggested retail price minus 8% or manufacturer s invoice price plus 4% v FMV is as of the date the vehicle is first made available to the employee 2018 The Payroll Advisor 32

33 General Valuation Method v Most liberal v Any employee v All use taxable v Employee deducts business use on personal taxes v 2% AGI is a problem v More taxes as well 2018 The Payroll Advisor 33

34 Annual Lease Value Method v Must be consistent in using method v Need value of vehicle v Need vehicle use log v Use annual lease value table v Must use for 4 years or until car is transferred v Prorate if less than full year 2018 The Payroll Advisor 34

35 Annual Lease Value Method v Annual lease value table includes the value of maintenance and insurance for the automobile v Do not reduce the amount of the table for the value of the services if you do not provide them v Does not include fuel 2018 The Payroll Advisor 35

36 Annual Lease Value Method v The value of fuel must be included separately in the employee s wages v May use fair market value or 5.5 cents per mile v Do not have to include the value of a telephone or specialized equipment if the equipment is necessary for the business 2018 The Payroll Advisor 36

37 Annual Lease Value Example $18,000 vehicle driven 14,741 miles. 1,540 were for personal use: 2018 The Payroll Advisor 37

38 Annual Lease Value Example Calculations Formula is: Personal use miles divided by total miles = percentage of personal use Percentage of personal use times value on chart = taxable income 2018 The Payroll Advisor 38

39 Annual Lease Value Example Calculations 1,540 miles/14,741 miles = 10.44% Table value of vehicle = $5,100 $5,100 x 10.44% = $ taxable income 2018 The Payroll Advisor 39

40 Cents Per Mile Method v Vehicle must be under $15,600 for 2018 v $17,600 for trucks or cars on truck chassis including SUVs v Must have log v Driven over 10,000 miles in calendar year and used primarily by employee v $.545 per mile for The Payroll Advisor 40

41 Cents Per Mile Method Formula is: # of personal use miles x IRS current per diem rate = taxable wages Example: 1,540 miles x $.545 = $ The Payroll Advisor 41

42 Cents Per Mile Method v Includes the value of maintenance and insurance v Do not reduce the rate if you do not provide v If you do not provide fuel you can reduce the rate by 5.5 cents per mile v If employee pays for gas then charge 49 per mile 2018 The Payroll Advisor 42

43 Commuting Method v Don t need value of vehicle v Need only know how many days employee drove vehicle v Restricted by employee v $1.50 each way--$3.00 per day 2018 The Payroll Advisor 43

44 Commuting Method Formula is as follows: # of days driven times $3 per day Or # of one way trips times $1.50 Drove 280 days taxable income 280 x $3 = $ The Payroll Advisor 44

45 Commuting Method Vehicle is provided to the employee for use in trade or business or for other bona fide non-compensatory business reasons and employee is required to commute in the vehicle 2018 The Payroll Advisor 45

46 Commuting Method v Written policy in effect, which prohibits the employee from using the vehicle for personal purposes other than commuting v Cannot be a control employee 2018 The Payroll Advisor 46

47 Personal Use of Company Aircraft 47 v Taxable under section 61 of the IRC v Can determine value by two methods: 1. General valuation rule 2. Non-commercial flight valuation rule 2018 The Payroll Advisor

48 General Valuation Method 48 Amount individual would pay at an arm s length transaction to charter a comparable aircraft and pilot for a comparable flight If more than one employee on flight allocate among employees 2018 The Payroll Advisor

49 Non-commercial Flight Valuation Rule 49 v Section (g) of the Income Tax Regulations provides rule for valuing noncommercial flights on employer-provided aircraft v Section (g)(5) provides an aircraft valuation formula to determine the value of such flights. v The value of a flight is determined under the base aircraft valuation formula--the Standard Industry Fare Level formula or SIFL 2018 The Payroll Advisor

50 Formula 50 Multiply the SIFL cents-per-mile rates applicable for the period during which the flight was taken by the appropriate aircraft multiple provided by IRS and then add the applicable terminal charge The Payroll Advisor

51 Formula The SIFL cents-per-mile rates in the formula and the terminal charge are calculated by the Department of Transportation and are reviewed semi-annually The Payroll Advisor 51

52 Formula 52 Step 1 SILF x mileage Step 2 Step 1 x Aircraft multiplier Step 3 Add in Terminal Charge 2018 The Payroll Advisor

53 Chart 1: Charges and Rates Period Terminal Charge SIFL Mileage rates to $41.71 Up to 500 miles $ miles $ Over 1500 miles $ Period Certified Takeoff Weight of Aircraft Control Employee to ,000 lbs. or less 62.5% 15.6% 6,001 10,000 lbs. 125% 23.4% 10,001 25,000 lbs. 300% 31.3% 25,001 lbs. or more 400% 31.3% 2018 The Payroll Advisor 53 Non-Control Employee

54 Example with Calculations Zelda is a non-control employee and the plane has a certified takeoff weight of 26,000 pounds. Zelda flies from Charleston SC to Las Vegas, NV (1,735 miles nautical miles) Use the internet or ask the aircraft company for the mileage must be nautical or air miles 2018 The Payroll Advisor 54

55 Example with Calculations v Step 1: Calculate the mileage itself on 1,735: v 500 x.2282 = $ v 1000 x.1740 = $ v 235 x.1673 = $ The Payroll Advisor 55

56 Example with Calculations Step 2: Total the miles calculation then multiple by the type of employee percentage based on the aircraft weight of 26,000 and a non-control employee 2018 The Payroll Advisor 56

57 Example with Calculations v $ $ $39.32 = $ v $ x 31.3% = $ The Payroll Advisor 57

58 Example with Calculations Step 3: Add in the terminal charge and that is the taxable wages for one way double if round trip v $ $41.71 = $ one way 2018 The Payroll Advisor 58

59 Mixing Business and Personal v If employee taking both business and personal flights on the same trip break out the personal miles then do the calculations v For Example: The employee flew from New York to Los Angeles with a quick flight to San Diego from Los Angeles for personal reasons Only the miles to San Diego and back are taxable as personal miles 2018 The Payroll Advisor 59

60 Questions 2018 The Payroll Advisor 60

61 How Can Ascentis Help Me? Ascentis Payroll is a Web-based, Internet payroll system that allows you to process payroll in real-time, ensuring 100% accuracy, flexibility and control. With live processing and instantaneous auditing, Ascentis Payroll software can reduce payroll processing time by as much as 30%. 61

62 To earn RCH credit for live presentation you must Stay on the webinar, online for the full 60 minutes Be watching using your unique URL Program code delivered by , to registered , by Apr The Payroll Advisor 62

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