4.1. ERMUSR 05-12-2009 - Laserfiche WebLink

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General requirements for using these special valuations: ~ Employer and employee must timely report personal use as wages. ~ Generally, the rules are applied on avehicle-by-vehicle basis. Employer may use different rules for different vehicles. Automobile Lease Valuation Rule Compute the value for purposes of the lease valuation rule as follows: 1. Determine the fair market value (FMV) of vehicle on first day made available to employee. 2. Use the table in Reg. § 1.61-21(d)(iii) or Pub. 15-B to compute the annual lease value; 3. Multiply the annual lease value by the percentage of personal use computed in Step 1. 4. If fuel is provided, add 5.5¢ per mile driven by the employee to the table lease value. Maintenance and insurance costs are included. Reg. x'1.61-21(d) Note: The employer's cost, including tax, title, etc. may be used to determine the FMV. See the Regulations for information on the valuation of leased vehicles. Reg. x'1.61-21(d)(5) Example: Joe, an employee of Agency XYZ, uses an agency-provided car. In 2009, Joe drives the car 20,000 miles, of which 4,000 were personal miles or 20% (4,000/20,000 = 20%). The FMV of the car is $14,500 for an Annual Lease Value of $4,100. Personal use is valued at $820: ($4,100 x 20%) plus $220 (5.5¢ x 4,000 miles) for fuel costs. $1,040 ($820 + $220) is included in Joe's wages. Recalculation of Value after 4-Year Lease Term Once computed, the Annual Lease Value remains in effect until 12/31 of the 4th full calendar year after the rule is first applied. Reg. ,¢1.61-21(d)(2) Example: Joe is assigned an agency-provided car on 2/17/08. The agency uses the same $4,100 annual lease valuation until 12/31/12. After the 4`h full year, or if the vehicle is transferred to another employee, the value may be recalculated (unless the purpose of the transfer is only to reduce the tax). 50