Many businesses own vehicles that they then provide to the employees to use as part of their work. Indeed, it is from the use of these vehicles that many lawsuits stem. Employee use of these vehicles for business purposes is not taxable income as it is part of the businesses’ cost. But there are limits on this use and any personal use of a company vehicle is taxable and must be reported by the employee.
Personal use of the vehicle includes travel between work and home, use by the employee to take a vacation, use on the weekend, and use by someone other than employees. There are a couple ways to account for this and your business accountant can help by recommending the best method and how to track business versus personal use.
Permissible Personal Use
While your company may have a policy on personal use, the IRS also doesn’t want to hear about de minimus or fringe personal use, or use too small to be worth calculating. Further, vehicles that are unlikely to be used for personal purposes such as specialty vehicles are not normally required to report personal usage. Again, this is specific to the business and the vehicle in question. Many businesses allow employees to drive their work vehicle home from work or let them use it to run occasional personal errands while they are otherwise working in the company’s employee.
Your business will need to set a policy on what type and amount of personal use of business vehicles is permissible and this will largely depend on the employee and the type of business you are engaged in. While you do have a lot of flexibility in setting this policy, it is important to have a well-documented policy on use.
Accidents While in a Work Vehicle
Accidents in company vehicles are one major source of business litigation. While a work vehicle will carry insurance in the company’s name, the employee may be the victim of the accident, the party responsible for the accident, or part of a complicated pile-up of liability. In some cases, the employee may be liable outside of the company’s policy, depending on whether the car was being used at the time for a personal or a business purpose. The company is generally responsible if the vehicle was being used for a business purpose, but defining exactly where that line is drawn is even more complex in this situation.
Whatever your case, the experienced team of litigators at the Dunn Law Firm can help you determine what needs to be done to defend your business. To learn more, reach out to the Dunn Law Firm by calling (435) 628-5405 and set up a free consultation today.
