If an employee is given a company verhicle upon retirement how is that recorded for tax purposes?



We gave an employee his work vehicle upon retirement. Value of the vehicle is 10,000. Employee has requested we take taxes on the value of the car. How do I report this for payroll and tax purposes? Is it compensation or non-compensation since we are collecting the tax on it but it is a vehicle and not a paycheck? Any help would be appreciated!

If an employee is given a company verhicle upon retirement how is that recorded for tax purposes?
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3 Replies to “If an employee is given a company verhicle upon retirement how is that recorded for tax purposes?”

  1. Oh….it’s compensation the same as if you gave him cash.

    Option 1) Calculate the taxes on $ 10,000 and withhold it on any future pay.

    Option 2) “Gross Up” a paycheck. Find a Gross Up calculator and do a paycheck that nets down to $ 10,000. Where I am, this would be a paycheck of around $ 16,500 but would vary based on what state you are in. Then, subtract $ 10k as an advance leaving a gross paycheck of around $ 16500, a net paycheck of $ 0 and him, with a vehicle. The $ 16500 would show up in is W2 as would the various withholding amounts.


  2. Establish the Fair Market Value of the vehicle which you appear to have done and include that value in his wages subject to flat rate withholding.


  3. Anything that you pay an employee — cash, marbles, frozen pizzas, cars, Walnettos, mouse traps, Swedish meatballs, whatever — is wages subject to tax.

    You withhold FICA at 7.65%, FITW at 25% (since this is an irregular bonus payment the flat rate applies) and whatever your state requires on a bonus. If he has sufficient other cash wages payable you can deduct those from that pay. Alternatively you can ask for a cash payment from the employee to cover the tax and adjust this on your next payroll tax return. Or you can do a “gross up” calculation as another poster suggests. The advanced calculators at http://www.paycheckcity.com can do gross up calculations for you. You do have to register with the site to use them but there is no charge.





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