Operating a fleet company is a very complex endeavor, there are various key elements to consider while running a fleet of vehicles smoothly. One of the most important elements is the tax liabilities of the company. There are various taxes you have to pay while operating a fleet. These taxes include the ownership tax, sale tax, fuel tax, IFTA tax and HVUT tax etc. All these taxes need to be paid on time. On top of these taxes your employees also have to pay income tax to the IRS.
When you are paying that much taxes to the government then it becomes all the more important to know your tax benefits. It is absolutely essential for the owner of the fleet and his employees to properly understand the fleet taxable benefits for their own good. Latest tax softwares is helping businesses to find all the areas where they can save money.Read More
Fleet Taxable Benefits
While operating a fleet of vehicles, you are already habitual of paying a lot of taxes. Therefore it is crucial to understand each and every fleet taxable benefit you can get. Understanding the tax benefits and liabilities are equally important for the fleet operators and the employees.
As a fleet operator, if you don’t follow the rules and regulations of the IRS, you might end up paying too much in taxes and penalties while ending up losing your taxable benefits.
Simultaneously, your employees are also required to pay taxes for their income. If they receive the payment in form of cash or any other way of compensation, they might end up paying less taxes. This will impact the benefits they enjoy from the government, because they need to pay a certain amount of tax to enjoy all the benefits offered by the government. Most of the time employees are less aware of the tax implications, therefore it is the employer’s job to educate them about their tax benefits and liabilities.
So what kind of benefits are there for the fleet operator and the employees of the company?
Vehicle Loan Tax Benefits
It is of your best interest to get your vehicle financed when the tax benefits are concerned. Loaned vehicles are exempted from the taxes. Therefore, you don’t need to spend your precious revenue on purchasing a vehicle by paying full from your pocket.
Fuel Benefit Tax
Most of the time the fleet companies provide many benefits to their employees and fuel allowance is one of them as long as they provide them the proper log of the miles driven for official work and the receipts of the fuel purchased by them. Every employee enjoys these fuel allowances with the help of an ifta tax calculator but very few are aware of the tax benefits of the fuel allowance.
Situation 1 : Vehicle is used exclusively for official purposes
In this situation there are no tax liabilities, irrespective of who is the owner of the vehicle. To keep this without tax liabilities, the employer needs to maintain the proper records and details of the trip taken by the employee for official purposes. Employers also have to provide a certificate that the vehicle is solely used for official purposes.
Situation 2 : Vehicle is used for personal purposes.
In this situation, fuel expense, vehicle maintenance charges and the driver’s salary are fully taxable irrespective of who owns the vehicle.
Situation 3 : Vehicle is used for both personal and official purposes and is owned by the company.
If the vehicle’s expenses are solely paid by the employee then he has to pay a flat amount of tax to the IRS. In case a driver is also provided then he has to pay additional tax on top of the flat rate.
If the vehicle’s expenses are provided by the employer, then the taxable amount is equal to the total expenditure incurred by the company minus the fixed amount of fuel and maintenance charges minus fixed amount for driver’s salary minus the amount of tax collected from the employee.
Situation 4 : Vehicle is used for both personal and official purposes but owned by the employee.
If the vehicle is owned by the employee and all the expenses are met by the employer then the taxable amount is the difference between the total expenditure incurred by the employer and the flat tax rate plus driver’s salary discount.
The basic idea behind the fleet taxable software is to decrease taxable income and help your employees save more money. Fuel allowance is the best way to do this.
From the taxable benefits point of view, it is very important that your employees keep a proper record of each mile traveled for official and personal purposes. The best software for small business also keeps all the fuel purchase receipts and maintenance records.
From the employer’s point of view, they need to do proper payroll tax remittances. As your business grows, you have to be on your heels to pay the payroll taxes on time and properly. The most important thing is knowing the tax implications of your actions. It is good to provide benefits to your employees but also equally important to educate him about the tax benefits of the allowances given to him.