Business miles on Company car. Fringe Benefits

[aj786]

Hello everyone. I work from home office and meet with clients in the field few times a week. In 2017, I had a company car through my ex-employer which was leased through a third party. I left the company few months ago and  I just recently received an email from HR that the calculated personal use for this car is around 6k for 9 months. I drove the car for about 18K miles in 2017 and almost 90% is for business use. The leasing company forgot to ask me for personal and business miles. Since they didn’t have any record, the simply put all of the miles on the car under personal use. This ends up in almost 6k in fringe benefits that will be reported on my W2 for 2017.

Now, they have told me that I can take exemptions for personal miles on my taxes. Since I didn’t own/lease the car under my name, am I allowed to claim business miles on company car. I will have all the records of my business usage and personal usage for the miles driven on company car.

[TaxGuyBill · Accepted solution]

The leasing company shouldn't ask for your business miles, HR should.  You should report that to them, and hopefully they will only include the personal miles on your W-2.  However, if you have not been regularly reporting your business miles, they may not be allowed to.

No, personal miles are not deductible on your tax return.  However, BUSINESS miles sort-of are.  If HR is unwilling or unable to remove the business miles from your W-2, you can enter the "Job Expenses" into TurboTax.  Unfortunately, that is part of a category that is limited to the amount over 2% of your income.  For example, if your income on your tax return is $50,000, the first $1000 won't be deductible.  If you don't usually Itemize your deductions (because the Standard Deduction is larger), the mileage deduction would further be reduced or eliminated.

As for the fact that the lease is not in your name, that is a bit tricky.  However, because you are essentially being charged for it (by adding to your W-2), my first thought is to go ahead and claim the expenses as Job Expenses anyways using the "Actual Expenses".

[aj786]

Hello and thank you for your detailed answer. I got some clarification on this from HR but they are still un-cooperative and might not fix their mistake. Since HR was missing miles information, they entered 0 miles as my personal & 0 miles business use. The entire amount of ~6k fringe benefit is coming from the calculated annual lease of the car divided by 9 months that I was employed this year. I take standard deduction and file married - jointly.

According to the email I got from them, I am responsible for social security, medicare, federal, state and local taxes on the fringe benefits. What I need clarification is that if job Expense amount=Auto Fringe benefits amount then will there by any sort of tax liability from my part on this “extra fringe income.”

-Thanks Again.

[TaxGuyBill]

Yes.  It is likely that all of it would be taxable, and you will receive little or no deduction to offset it.

Social Security and Medicare taxes would still be paid, and that is not a deduction on your tax return.  Also, the 2% limitation and the fact you use the Standard Deduction will greatly reduce or eliminate any Job Expense deduction.

So your best option is to beg HR to change things.

[RobbySG]

Bill, 

Similar question - my company made an error in reporting my personal miles, then corrected it.  Because they corrected it in January, after the year closed, they wouldn't give back the extra $800 I paid at the end of the year. I was supposed to owe $3,163.19 and instead they took out $3,963.42 before they made the correction.  Can and how do I account for the extra $800?

[DaveF1006]

This would be something you would need to resolve with your company.  To claim this on your taxes is no longer permitted. It is called a Right of Repayment and it was phased out during the Tax Cuts and Jobs Act in 2017.