|Responsible University Administrator:||Vice President for Finance and Administration|
|Responsible Officer:||Director of the Office of Budget and Tax Compliance|
|Current Revision Date:||02/20/13|
|Next Review Date:||02/20/17|
|End of Policy Date:||NA|
The personal usage of courtesy automobiles by The University of Southern Mississippi (Southern Miss) employees is considered to be taxable compensation by the Internal Revenue Service (IRS). This manual is designed to insure compliance with IRS guidelines regarding personal use of courtesy automobiles.
This policy applies to all employees of Southern Miss who are provided the use of a courtesy automobile in connection with the performance of their jobs.
This policy is required for the effective communication of university policies regarding courtesy automobiles.
All employees who use courtesy automobiles.
|annual lease value||The fair market value of the automobile is cross-referenced to an “annual lease value” table set by the IRS.|
|commuting||the drive between the employee’s residence and the employee’s place of business. The IRS has ruled commuting to be personal use.|
|fair market value||based on the “blue book value” of a car as determined by Kelley Blue Book. The FMV will be determined based on the first day the automobile is made available to the employee.|
|personal use||Any usage of the courtesy automobile for a purpose other than business is considered to be “personal use.” Personal use can be made up largely of commuting to and from work and the use of the automobile to take long trips not related to work (i.e., vacation, etc.). A stop by the dry cleaners or driving the automobile to lunch does not constitute personal use.|
The Tax Reform Act of 1984 clarified that personal use of employer-provided vehicles (in this case, courtesy automobiles) constitutes taxable compensation equal to the fair market value (FMV) of the personal use of the vehicle. The value of the additional compensation is to be added to the employee’s income based on the ratio of personal use to total vehicle use and the value of the assigned vehicle. Southern Miss is required to withhold FICA taxes (also known as Social Security Tax) on the additional compensation, and will withhold Mississippi State Income Tax, but is not required to withhold Federal Income Taxes. The taxes to be withheld will be deducted on the employee’s November paycheck. The value of the personal usage will be reported on the IRS Form W-2 in box 12, “Benefits Included in Box 1.”
The additional compensation attributed to employees will be calculated on the basis of the FMV of the benefit. The FMV is composed of the ratio of personal miles to total miles driven, an IRS-derived lease value, and a per-mile gasoline charge if the employer provides or reimburses for gas. The additional income generated by the FMV of the personal use will be calculated on an annual basis.
Every employee assigned a courtesy automobile will maintain a mileage log, which clearly distinguishes dates of occurrence, business miles driven, and purpose of business, as well as the monthly beginning and ending odometer readings. Any miles driven, but not reported as used for business, will be considered personal usage. This log should be turned in once a month, and will be considered Southern Miss property, and can be requested by University administration at any time for inspection or to archive. If an employee does not turn in a mileage log, all the miles driven that month will be considered personal usage.
Southern Miss will use the “special accounting period” provided in the Internal Revenue Code. This rule allows an employer to report the additional income for November and December in the next calendar year. Therefore, the reporting period will run from November 1 to the following October 31.
Should an employee leave Southern Miss before the end of the special accounting period for the year, he/she will be required to turn in his/her monthly mileage log the day the courtesy automobile is turned in. The additional income for the year to that point will be calculated and reported on his/her last paycheck. (Remember, no federal taxes will be withheld, only FICA and state tax.) If the employee does not turn in the mileage log for the month he/she leaves, all miles driven that month will be considered personal, and the additional income will be calculated accordingly.
All Southern Miss employees who enjoy the benefit of driving a courtesy car must report some personal usage as they are allowed to commute in the courtesy car. Southern Miss expects this usage to equal approximately 20%, and an employee must be able to show substantiated proof if he/she believes his/her personal use is less than this.
The personal usage percentage will be calculated based on the information turned in by the employee. If no information is available, personal usage will be 100%. If the usage calculated (again, based on information turned in by the employee) is less than 20%, the employee will be required to turn in supporting documentation.
Coaches and Other Athletic Personnel Courtesy Automobile Drivers
An additional gasoline charge will not be included in Southern Miss calculations for employees of the athletic department. Those employees are reimbursed at a different rate per mile. The specific rate can be obtained from the Accounts Payable Department.
In addition, athletic personnel will not have any additional charges (i.e., gasoline charge) added to the additional income calculated at the end of the special period due to the fact that these personnel are required to pay for their own automobile insurance.
Courtesy Automobile Drivers
It will be the responsibility of the courtesy automobile driver (driver) to document on the Courtesy Automobile Mileage Log (Appendix 1) on a monthly basis the business miles driven. It is also the driver’s responsibility to report the odometer reading at the beginning and end of each month. This log is important, as it will help determine the personal usage percentage used in computing additional income to be reported on the employee’s IRS Form W-2 for the year in question.
In addition, the driver must also complete a Courtesy Automobile Usage Questionnaire (Appendix 2) on November 1 of every year, and each time a new courtesy automobile is issued. These questionnaires are important, as they will help determine the “blue book value” of the car(s) driven.
Coaches and other athletic personnel should turn in their logs and questionnaires to the Southern Miss Athletic Department.
All other individuals with courtesy vehicles should turn these forms in to the Controller’s Office as required.
Southern Miss Athletic Department
It will be the Southern Miss Athletic Department’s responsibility to track the assignments of courtesy automobiles to coaches and other athletic personnel, including the date of assignment and the date the cars are turned in. The Associate Athletic Director for Internal Affairs will also be responsible for collecting the Courtesy Automobile Mileage Logs (on a monthly basis) and the Courtesy Automobile Usage Questionnaires (at the year’s end or when a driver terminates employment). Copies of these forms should be forwarded to the Controller’s Office each month or when a driver leaves the university, and no later than November 5 at year-end.
The University of Southern Mississippi’s Foundation and Alumni Association
It will be the USM Foundation and Alumni Association’s responsibility to track the assignment of courtesy cars to Southern Miss individuals not in the athletic department.
The Controller’s Office should be notified when a change in cars is made so that a Courtesy Automobile Usage Questionnaire can be filled out accordingly.
The Controller’s Office
It will be the responsibility of the Controller’s Office to collect the Courtesy Automobile Mileage Logs (on a monthly basis) and the Courtesy Automobile Usage Questionnaires (at the year’s end or when a driver changes cars or terminates employment) from those individuals not in the athletic department.
Copies of these forms should be forwarded to the Controller’s Office no later than November 5 of each year or when a driver leaves the University.
It will also be the Controller’s Office’s responsibility to calculate the additional income incurred by the employee from the personal use of a courtesy automobile from the information supplied by the drivers on the Courtesy Automobile Mileage Logs and the Courtesy Automobile Usage Questionnaire. A sample calculation is included in Appendix 3.
Upon completion of all calculations, the Controller’s Office will send memorandums to all drivers making them aware of the additional income and will communicate the additional income to Payroll in order for FICA and state taxes to be withheld on the employee’s November paycheck.
Appendix 1: Courtesy Automobile Mileage Logs
Appendix 2: Courtesy Automobile Usage Questionnaire
Appendix 3: Sample Calculation
Appendix 4: Sample Memo
Appendix 5: W2 Form Explanation
Amendments: Month, Day, Year – summary of changes
11/01/11: Formatted for Institutional Policies website.
02/20/13: Formatted for template. Minor editing of punctuation and word usage throughout.