QB and accounting for fringe benefits

Client's bookkeeper has asked me for help in recording the value of the personal use of the corporation's auto. I don't do payroll (not even my own) and I don't know QB very well.

The value of the fringe is $14,000. FICA and Medicare are the only relevant taxes; there is no income tax withholding.

She said that QB is creating a liability on the corporation's balance sheet. I said that I thought that there would be a liability = the corporation's share of FICA and Medicare on the value of the fringe benefit + FICA and Medicare withheld from the employee's paycheck. Is that correct? Is there any other liability that QB would create?

How is the $14,000 treated on the corporation's income statement? It seems to me that it would be excluded from officer's compensation since it is a noncash item and all of the costs of operating the auto are included in the income statement. Am I correct that the $14,000 is a reconciling item between the W-2 and the income statement?

If you have specific steps or information on how to do this, we are listening....

Thanks for any help.

It is possible to handle this "correctly" via QB payroll, once the proper payroll item is set up. I had an S-corp 100% owner with this fringe benefit for several years, so if no one else answers, I will go back and look at the QB file to try to remember how we did it.

You are correct that the value of the fringe benefit (which is based solely on FMV to the employee) is not an expense for the business, since as you state 100% of the automobile business expense is already on the income statement.

At my last employer's we had a handful of auto fringe calculations. We just credited the next check to Auto Expense.

JAD-$14,000 is a high amount for corp auto fringe. See the ALV table attached. Here is how I handle the tax treatment on company books.

https://www.lsu.edu/administration/ofa/ ... evalue.pdf

This fringe amount would be 100% personal use of a $55,000 auto.

The way the corp personal use of company care works is as follows. Take the value (FMV) of the auto as shown on the ALV tables. Remember, this is 100% personal use. If the car FMV is $41,000 and used 70% for business. 12,000 miles/year driven you get this result:

The taxable fringe is $10,750 x 30% = $3,225 + 5.5 cents per personal mile ($198) for a W-2 inclusion of $3,423.

Debit salaries, credit personal use company car (or vehicle expense). I opt for the separate revenue line and show it that way on the entity tax return.

You use the purchase price of the car for the first 5 years of calculations. After that, you find the FMV and use that new FMV for the next 4 years.

Thanks, Doug. I am confident in my calculation. It is a very nice car. Plus we have to add the personal portion of fuel. My recollection is that the 5.5 cents per mile for fuel only applies if the fuel is provided on site. I take the % of personal use times the actual cost of gas and add that to the fringe benefit income.

Reg. Sec. 1.61-21(d)(3)(ii)(C)

Valuation of fuel where cost reimbursed by or charged to an employer. The fair market value of fuel, the cost of which is reimbursed by or charged to an employer, is generally the amount of the actual reimbursement or the amount charged, provided the purchase of the fuel is at arm's-length.

I read something in a newsletter recently that caught my eye. Didn't the FMV limit used to be much, much lower, like $15K, just a few years ago? I don't remember when this limit was raised to $50K, anyone else?

"Cents-per-mile valuation rule
Under the cents-per-mile valuation rule, the FMV of the vehicle use is determined by multiplying the number of personal use miles by the standard mileage rate (for 2018, 54.5¢ per mile). The cents-per-mile valuation rule may be used to determine the taxable fringe benefit only if the FMV of the vehicle on the first date it is made available to the employee does not exceed a specified dollar limit (for 2018, $50,000 for a passenger automobile, truck, or van)."

JAD-you do not apportion out the personal gas via % of personal use x gas paid by company. You use the 5.5 cents per mile.

https://www.mml.org/pdf/information/irs ... -guide.pdf

see pages 8-9

I think that there is a difference if fuel is provided in kind

1.61-21(d)(3)(ii)(B) Valuation of fuel provided in kind. The provision of fuel in kind may be valued at fair market value based on all the facts and circumstances or, in the alternative, it may be valued at 5.5 cents per mile for all miles driven by the employee. However, the provision of fuel in kind may not be valued at 5.5 cents per mile for miles driven outside the United States, Canada or Mexico. For purposes of this section, the United States includes the United States, its possessions and its territories.

vs charged to or reimbursed by employer, 1.61-21(d)(3)(ii)(C), cited above.

I am having trouble finding a definition of "provided in kind", but the regs seem to distinguish between provided in kind and charged to the employer or reimbursed to the employee. My recollection is that provided in kind is where the company has a gas pump on site.

Any reimbursement by EE (i.e. employee purchases some gas during the year) reduces the ALV computation. I highly doubt in-kind is relevant to your situation.