Year End Tips As we near the end of 2007, we want to help you comply with IRS regulations and ensure that you are reporting fringe benefits in the prescribed fashion.  Please use the forms and examples provided to assist you.  If you have any questions or difficulties, feel free to contact us. Business Vehicles: Virtually any vehicle that lends itself to personal use is subject to certain limitations and personal use must be valued and reported on the W-2 of the employee and/or shareholder each year.    Click this link to get the information you need to calculate this fringe benefit.  At the bottom of the form, you will find links to a table and an example of how to calculate the total value.  Please send us this form along with your 2007 records.  The auto fringe benefit is subject to income tax withholding and social security withholding, so you will want to "gross-up" the taxable benefit. Client Advice: The IRS has undertaken an audit initiative that focuses on executive compensation and fringe benefits, including employee use of employer-provided transportation.  When the initiative revealed significant noncompliance in many of the targeted areas, the IRS incorporated these issues into routine audits and is using employment tax field audit specialists to look at executive compensation and fringe benefit issues when auditing businesses and their owners.  Business owners need to make sure that they are currently in compliance with the rules for substantiating business use of employer-provided automobiles and for valuing personal use of employer-provided automobiles. ** Beware this often-litigated and dangerous constructive dividend issue for shareholder use of vehicles owned by closely held corporations. The compensatory nature of personal vehicle use by shareholder-employees should be well documented if the corporation wants to deduct auto expenses. S-Corporations: The amount of health insurance paid for shareholders is a taxable fringe benefit that should be included in the W-2 of a more than 2% shareholder.  The shareholder will then deduct 100% of the premium on his/her tax return.  When you send us your 2007 information, please include a breakdown of health insurance paid for each shareholder and verify that it was included in the shareholder's wage earnings.  The health insurance premiums are subject to income tax withholding, but not subject to social security withholding.