IRS Addresses Unintended Personal Use Tax Consequences from COVID-19
The Internal Revenue Service is providing temporary relief for company drivers who are determining the value of company-provided personal use vehicles through the annual lease value (ALV) and who may be experiencing potential tax consequences brought on by the COVID-19 pandemic.
The IRS announced its issuance of Notice 2021-7, which grants companies that allow use of the ALV method to determine personal use value to instead use a vehicle cents-per-mile (CPM) valuation rule starting when COVID-19 was declared a pandemic on March 13, 2020. Personal use of company fleet vehicles is considered a taxable fringe benefit by the IRS that is treated as income. Because the ALV method is common among fleets, the unintended tax consequences could have impacted tens of thousands of employees due to pandemic-related changes in the work environment, according to NAFA representatives.
EMKAY will be reaching out to all participants in the Personal Mileage Program for next steps, appropriate methodology, and calculations.