Question

As part of his contract at his new job, Jim is provided a company car and gas card to go back and forth to work. He sometimes uses the car for out-of-town travel approximately once a month. Jim also uses the car and the gas card for his family vacations, dinner, etc. Explain the applicable tax law regarding employee compensation and the criteria for deducting expenses. Make at least two recommendations for ways that Jim can ensure that he is compliant with the tax law.

Answer 1

the company as per IRS that company car by jim for business use that will not be regarded as a

fringe benefit on the other hand jim use of the car and the gas card for personal uses like family

vacations dinners etc will be regarded as a fringe benefit as per the IRS fringe benefits will form a

part of an individual taxable income

this is as per the IRS provisions jim can deduct the expenses of the car with regards to business

use but the amount applicable in case of personal use will be included in jim taxable income

two recommendations that will ensure jim compliance will be tax laws

1. keep a track of the car mileage and separate it by personal use and business use this will help in

determining the amount of fringe benefits that will be included in jim taxable income

2.maintain a record of all out of pocket expenses related to the car out of pocket expenses will be

maintenance repair etc this cost will be separated by personal use and business use