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1110 PR.01 Personal Use of a University Vehicle
November 23, 2010
- Business vs. Personal Use
- Substantiating Business and Personal Use
- Income Tax Reporting and Withholding
The value of the personal use by an employee of a University vehicle is considered additional taxable wages (i.e., compensation for services). The value of the business use by an employee of a University vehicle is not considered additional taxable wages.
The University maintains a record of the vehicles it owns and leases and the departments that own or lease them. If the use of any of these vehicles is not restricted to use for official University business, the business manager or administrator must notify the University Tax Office of the personal use and provide the required documentation to the Tax Office by November 30 of each year; this will enable the University to report additional compensation in an accurate and timely manner.
Business use of a University vehicle is any use for official University business.
Business use of a University vehicle includes (but is not limited to):
- traveling between the employee’s main or regular place of work and another regular place of work
Example: An employee works regularly at both a Medical School building and a central campus building and travels between them using a University vehicle.
- traveling between the employee’s main or regular place of work and a temporary work location
Example: An employee travels between his/her regular work location on campus and a company in Bridgeport where he attends a meeting related to official University business.
- traveling between the employee’s home and a temporary work location
Example: An employee travels between his/her home and an institution in Hartford for several days to attend a job-related seminar.
Personal use of a University vehicle is any use that is not for official University business.
Personal use of a University vehicle by an employee includes (but is not limited to):
- commuting, i.e., traveling between the employee’s home and his/her main or regular place(s) of work (see detailed information below)
- using the vehicle to run a personal errand from his/her work location
- using the vehicle on weekends or days off for other than official University business.
One of the most common personal uses of a University vehicle is commuting, defined as an employee’s traveling between home and his/her main or regular place of work.
Travel that meets the above definition of commuting does not change from personal to business use of the vehicle if the employee works during the commute, for example, making business phone calls or holding business discussions with co-workers who are traveling with the employee. Also, transporting University equipment or University records or documents in the vehicle while commuting does not convert the trip from personal to business use.
Second Work Location:
If an employee regularly works at two or more locations in one day, traveling between the two locations is a business use of the vehicle. However, traveling between the employee’s home and any of his/her regular work locations is commuting, a personal use of the vehicle.
Temporary Work Location:
An employee’s traveling between home and a temporary work location is a business use of the vehicle rather than commuting. An alternate work location is temporary if it is realistically expected to (and does in fact) last for one year or less. An alternate work location is not temporary if it is realistically expected to (or does) last more than one year, or if employment at the location is indefinite.
Help in Classifying Vehicle Use
If you have any questions on whether a particular use of a University vehicle is personal or business use, contact the University Tax Office at 432-5530.
The reporting period for personal use of University vehicles begins on November 1 and ends on October 31, a full 12-month period. The University defers reporting of vehicle use income for November and December of a given year until it files its reports for the subsequent year.
- Example: Income from the personal use of a University vehicle during the period November 1, 2010 through October 31, 2011 is reported as additional taxable wages on an employee’s 2011 Form W-2. The value of vehicle use during November and December 2011 is reported on an employee’s 2012 Form W-2.
General Documentation Requirements
The Internal Revenue Service (IRS) requires the University to maintain documentation that substantiates an employee’s business and personal use of a University vehicle.
- When such records are maintained, the University is required to report to the IRS only the value of the personal use of the vehicle (determined from the substantiating documentation) as additional taxable wages.
- If such records are not maintained by the University, the entire value of the employee’s use of the vehicle (including both business and personal use) is considered personal use and must be reported as additional taxable wages to the IRS.
Assume the value of the use of a particular University vehicle for one year is $10,000. An employee uses the vehicle 90% for official University business and 10% for personal use (e.g., commuting) during that year.
- If the employee provides the University with documents that substantiate this allocation of business and personal use, $1,000 must be reported as additional taxable wages subject to FICA tax withholding.
- If the University is not provided with such documents and the employee used the vehicle for personal use, the entire value of the employee’s use of the vehicle or $10,000 must be reported as additional taxable wages subject to FICA tax withholding.
Personal Use of University Vehicles Summary Sheet
The business manager or administrator of each department that has University vehicles not used exclusively for University business during the reporting period must submit to the Tax Office by November 30 following the close of the reporting period, a Personal Use of University Vehicles Summary Sheet. The Summary Sheet reports the number of vehicles with personal use. A personal use of University vehicle questionnaire must be attached for each employee with personal use during the reporting period.
Personal Use of University Vehicle Questionnaire
The employee must complete the questionnaire and submit it, along with the Mileage Record Form, to the department business manager or administrator.
- The department administrator or business manager must review the questionnaire and supporting documentation (i.e., the mileage record form) to ensure that the information provided by the employee is accurate and complete, and must sign and date the questionnaire.
- the business manager or administrator must send a copy of the signed questionnaire to the Tax Office by the annual deadline, November 30 following the end of the reporting period , to ensure that the University can withhold and report on personal use as required.
The Tax Office will complete the personal use of vehicle calculation to determine the value of personal use of the University vehicle. The value of personal use that will be included as additional compensation will be communicated to the employee in December, prior to the issuance of Form W-2.
Each employee whose use of a University vehicle is not restricted solely to official University business must maintain a mileage record on the Mileage Record Form during the reporting period. This mileage record should be used to complete the Personal Use of University Vehicles Questionnaire at the end of the reporting period and should be submitted to the department business manager or administrator.
Retain Original Documents
The department must retain the mileage record form and the original signed questionnaire for at least 7 years in accordance with Policy 1105 Retention of University Financial Records.
Note: Please contact the Tax Office at 432-5530 before discarding any business records, including the mileage record and the original signed questionnaire, to verify that they are not required to be retained for federal or state tax audit purposes. Do not discard any documents that pertain to pending litigation.
University Reporting and Withholding
The University reports as taxable wages the value of the personal use of a University vehicle to the IRS, the state and the employee on Form W-2, Wage and Tax Statement (which reports wages paid to an employee during the calendar year). The University files Form W-2 with the IRS and the state and provides it to the employee by January 31 following the reporting period.
The University must withhold FICA tax (i.e., 1.45% Medicare tax plus 6.2% OASDI tax, if applicable) on this additional compensation from the employee’s regular pay during the year in which the relevant reporting period ends. This tax is withheld from the employee’s December paycheck.
The University does not withhold federal and state income taxes on income from the personal use of a University vehicle.
Important Tax Information for the Employee
Although the University is not required to withhold federal or state income taxes on this compensation, income from the personal use of an employer’s vehicle is generally subject to federal and state income taxes. The employee and his/her tax advisor must determine the impact of this additional income on the employee’s federal and state tax liabilities.
The employee may wish to adjust his/her federal and/or state income tax withholding for these additional taxable wages by submitting an IRS Form W-4, Employee’s Withholding Allowance Certificate, and/or a State of CT Form CT- W4 Employee’s Withholding or Exemption Certificate, to the Payroll Office. Alternatively, the employee may wish to make federal and/or state estimated tax payments. The employee should consult his/her tax advisor on this matter.
If you have any questions on the reporting of personal use of University vehicles, please contact the University Tax Office at 432-5530.