Publication 15-B - Employer'S Tax Guide To Fringe Benefits - 2012 Page 22
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3. A widow or widower of an individual who died while
An independent contractor who performs services
an employee.
for you.
4. A widow or widower of a former employee who re-
tired or left on disability.
Vehicle allocation rules. If you provide a car for an em-
ployee’s use, the amount you can exclude as a working
5. A dependent child or spouse of any individual listed
condition benefit is the amount that would be allowable as
in (1) through (4) above.
a deductible business expense if the employee paid for its
A tuition reduction for graduate education qualifies for
use. If the employee uses the car for both business and
this exclusion only if it is for the education of a graduate
personal use, the value of the working condition benefit is
student who performs teaching or research activities for
the part determined to be for business use of the vehicle.
the educational organization.
See Business use of your car under Personal versus
For more information on this exclusion, see
Business Expenses in chapter 1 of Publication 535. Also,
Publication 970.
see the special rules for certain demonstrator cars and
qualified nonpersonal-use vehicles discussed below.
Working Condition Benefits
However, instead of excluding the value of the working
condition benefit, you can include the entire annual lease
This exclusion applies to property and services you pro-
value of the car in the employee’s wages. The employee
vide to an employee so that the employee can perform his
can then claim any deductible business expense for the
or her job. It applies to the extent the employee could
car as an itemized deduction on his or her personal income
deduct the cost of the property or services as a business
tax return. This option is available only if you use the lease
expense or depreciation expense if he or she had paid for
value rule (discussed in section 3) to value the benefit.
it. The employee must meet any substantiation require-
ments that apply to the deduction. Examples of working
Demonstrator cars. Generally, all of the use of a demon-
condition benefits include an employee’s use of a company
strator car by your full-time auto salesperson qualifies as a
car for business, an employer-provided cell phone pro-
working condition benefit if the use is primarily to facilitate
vided primarily for noncompensatory business purposes,
the services the salesperson provides for you and there
and job-related education provided to an employee.
are substantial restrictions on personal use. For more
This exclusion also applies to a cash payment you
information and the definition of “full-time auto salesper-
provide for an employee’s expenses for a specific or prear-
son,” see Regulations section 1.132-5(o). For optional,
ranged business activity for which a deduction is otherwise
simplified methods used to determine if full, partial, or no
allowable to the employee. You must require the employee
exclusion of income to the employee for personal use of a
to verify that the payment is actually used for those ex-
demonstrator car applies, see Revenue Procedure
penses and to return any unused part of the payment.
2001-56. You can find Revenue Procedure 2001-56 on
For information on deductible employee business ex-
page 590 of Internal Revenue Bulletin 2001-51 at
penses, see Unreimbursed Employee Expenses in Publi-
cation 529, Miscellaneous Deductions.
The exclusion does not apply to the following items.
Qualified nonpersonal-use vehicles. All of an em-
•
A service or property provided under a flexible
ployee’s use of a qualified nonpersonal-use vehicle is a
spending account in which you agree to provide the
working condition benefit. A qualified nonpersonal-use ve-
employee, over a time period, a certain level of un-
hicle is any vehicle the employee is not likely to use more
specified noncash benefits with a predetermined
than minimally for personal purposes because of its de-
cash value.
sign. Qualified nonpersonal-use vehicles generally include
•
all of the following vehicles.
A physical examination program you provide, even if
mandatory.
•
Clearly marked, through painted insignia or words,
•
police, fire, and public safety vehicles.
Any item to the extent the employee could deduct its
cost as an expense for a trade or business other
•
Unmarked vehicles used by law enforcement officers
than your trade or business.
if the use is officially authorized.
•
An ambulance or hearse used for its specific pur-
Employee. For this exclusion, treat the following individu-
pose.
als as employees.
•
Any vehicle designed to carry cargo with a loaded
•
A current employee.
gross vehicle weight over 14,000 pounds.
•
A partner who performs services for a partnership.
•
Delivery trucks with seating for the driver only, or the
•
driver plus a folding jump seat.
A director of your company.
Page 22
Publication 15-B (2012)
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