IRS Auditing Fleets/Company Vehicles for Personal Use – GPS Fleet Tracking Can Help
The IRS has very specific rules regarding personal use of company or fleet vehicles. And the tax agency is beginning to seriously crack down in the form of audits, fines, and penalties levied against businesses that do not comply with these rules by allowing employees to use company vehicles for personal use.
Personal Use Problems
Employees’ personal use of company cars is supposed to show up on 1099 forms or employees’ W-2s. Companies that do not include this information are likely to become the targets of IRS audits for the use of business-owned vehicles for personal reasons.
Some businesses have a hard time getting cooperation from employees when it comes to reporting mileage and designated personal use. In response, many are turning to tactics such as reporting the full year’s lease value as personal use so that the employee is stuck paying the value of it.
In these instances, employees have the opportunity to itemize and deduct these business mileage expenses on their taxes. The fact remains that businesses need to create policies requiring employees to provide accurate and frequent mileage accounts.
What are the IRS Rules Regarding Company Vehicles?
With the crackdown hitting close to home for many companies that operate fleet vehicles or that provide vehicles for employee use, it’s a good idea to revisit the rules the IRS has in place concerning vehicles. These are a few of the highlights.
1) Employees may use company vehicles solely for the purpose of or in practice of their employers’ businesses.
2) Written policy must prohibit the use of company vehicles for personal use purposes other than the daily commute and for de minimis use, or use that is too trivial to matter or mention.
3) Employer must reasonably believe employees are adhering to company policies regarding vehicle use.
That’s the real problem business owners face. The IRS defines non-business use of company vehicles as a fringe benefit. They want clear records detailing personal and business use of these vehicles because personal use is taxable. Companies that have vehicles listed as 100 percent business use frequently become targets of IRS Audits.
A Solution for Your Predicament
How do you get employees to comply with the policies your business sets into place? The first step is to develop a series of consequences for failure to comply. Second is to provide some sort of oversight in order to ensure compliance.In the case of company vehicles, GPS Fleet tracking is an ideal solutions to this common problem. The software keeps accurate mileage records and the employee’s entire route is easily tracked and traced. This allows you to ensure your employee is where he or she ought to be in your company or fleet vehicles.
An added benefit to GPS fleet tracking in this situation is that it eliminates the use of your company vehicles for off hours moonlighting that is far more common than many businesses realize, and poses a serious liability risk for your business. You can even set the fleet tracking software to notify you when drivers leave certain districts, zones, or boundaries.
Spare your business the expense, embarrassment, and scrutiny of an IRS audit by enacting new policies today to discourage personal use of company vehicles and consider the installation of GPS tracking on your entire fleet of trucks and/or company cars. The benefits far outweigh the expense.