W-2 Reporting: S-Corp Owner’s Personal Use of a Company Vehicle
The end of the year is a great moment to get into the nitty gritty of tax accounting - here’s a brief guide to an underdiscussed but important tax question: properly reporting an S-Corp owner or employee using a company vehicle for personal use.
If the S-Corp owner or an employee uses a company vehicle for personal use, the value of this personal use is considered a fringe benefit (specifically, "noncash compensation"). This value must be included in the employee's W-2 as taxable wages.
Personal Use of Company Vehicle: If the owner/employee uses the company car for personal purposes (like commuting), the value of that use must be reported as additional taxable wages.
How to Calculate and Report Personal Use on W-2
Calculate Personal Use Value:
Use the Annual Lease Value Method (ALV) from IRS Publication 15-B.
Determine the annual lease value based on the vehicle's fair market value (FMV) when first made available.
Calculate the percentage of the vehicle's total use that was personal (e.g., 30% personal, 70% business).
Add the Personal Use Amount to the W-2:
The calculated personal use amount is added to Box 1 (Wages, tips, and other compensation) on the W-2 as taxable wages.
It is also added to Box 14 (Other) as a description for the employee/owner.
Example Calculation for W-2 Reporting
FMV of Vehicle: $50,000
Annual Lease Value (ALV) from IRS Table: $13,250 per year
Personal Use Percentage: 30%
Personal Use Amount:
13,250×30%=3,97513,250 \times 30\% = 3,97513,250×30%=3,975
This amount ($3,975) is considered compensation for the S-Corp owner and must be added to their W-2.Payroll Impact:
The S-Corp will withhold federal income tax, Social Security, and Medicare taxes on the additional $3,975.
The total taxable wages on the W-2 (Box 1) increase by $3,975.