When COVID-19 hit, many fleets grounded their vehicles intentionally as a safety measure or unintentionally due to business closures or reduced activity. As a result, during those early months of the pandemic, your fleet may have experienced a higher than usual number of personal use miles incurred on its vehicles, whether company-provided or driver-owned.
As you know, it is important for drivers to log and keep track of their business and personal miles on a regular basis. But this year, there are likely some new questions that may be on your mind regarding driver tax compliance (DTC) and fixed and variable rate (FAVR) programs.
DTC And Company-Provided Vehicles In The Age Of Covid
What are other clients doing about the Personal Use Contribution (PUC)?
Currently we do not know of any clients that are suspending PUC, but it is a common question we’ve been fielding.
If this is something you are thinking about instituting, one consideration is to suspend PUC one month at a time. Note, there will be a taxable benefit if any driver uses their vehicle for personal use, even one mile per month, during that time. That taxable benefit will be included in the driver’s W-2 at the end of the year.
If you do not want your drivers to have a taxable benefit, there is the option of “grossing up” the income to offset the effect of the increased taxable benefit.
Will/Is the IRS doing anything to redefine personal usage of company-provided vehicles during the COVID-19 pandemic?
Nothing has been announced at the current time. Wheels continues to work with our contacts to see if the IRS will implement a one-time exception.
If our entire fleet is grounded and we see some business mileage reported, are we obligated to review those mileage entries?
Although we cannot provide legal or tax advice, it is good practice for you to monitor mileage entry, within reason. If drivers were reporting business mileage when there could be no possibility of such activity, you may have some obligation to question why this is the case. The FleetView™ Mileage Certification Dashboard can help you with this process.
FAVR & Driver-Owned Vehicles
What happens if a driver does not meet the 5,000 business miles threshold?
According to the IRS Rev Proc 2019-46, a payer may provide a nontaxable FAVR allowance only to an employee who substantiates to the payer for a calendar year of at least 5,000 miles driven in performing services as an employee. Due to the current pandemic, it’s possible that a portion of the nontaxable FAVR reimbursement could be considered taxable.
Will/Is the IRS making any adjustments, exceptions or changes to FAVR parameters during the COVID-19 pandemic?
Nothing has been announced at the current time. Wheels continues to work with our contacts to see if the IRS will implement a one-time exception.
What are other companies doing for drivers who have not or may not trend to 5,000 business miles substantiated in 2020?
Currently, companies seem to be taking the approach that this year is “seasonal business” and ignoring the mileage trending. This only matters if a driver cannot substantiate 5,000 business miles by year’s end. If you want to be extra cautious, there is always the option of withholding the fixed payment, but we are unaware of anyone doing so.
This year has brought a lot uncertainly, and the tax year will look differently than what we’ve experienced in the past. But rest assured, Wheels is here to help. Our program is specifically designed to simplify the annual process of calculating, tracking and reporting personal use and taxable benefit valuation.
Wheels will continue to work directly with you to field your questions and deliver a program that ensures your company follows all applicable laws and procedures.
If you have a question, reach out to a member of your Wheels Account Team or email me at [email protected].