Read about Tax on: Cents-per-Mile, Moving Expense
Presented by Paystrubmakr.com By John Wolf and Tom Collen CPA
Cents-per-Mile Valuation Method §61
Under the cents per mile method, the value of the benefits equals the product determined by multiplying the total number of miles the employer drove the car for personal purposes by the optional standard mileage rate. To use this method, the value of the automobile must be less than the maximum fair market value (Reg. §1.61-21(e)(1) (iii)(A)). Maximum Values For 2019 For Use With Vehicle Cents-Per-Mile and Fleet-Average Valuation Rules
For 2018, an employer providing a passenger automobile for the personal use of an employee may determine the value of the private use by using the vehicle cents-per-mile value rule if the vehicle’s fair market value, on the date it is first made available to the employee, does not exceed $15,600 (down from $15,900 in 2017) for a passenger automobile other than a truck or van, or $17,600 (down a from $17,800 for 2017) for a car or van.
Employee Achievement Cents-per-Mile Modified – §74
Employee achievement awards are excluded from employees’ income (§§74 & 274). To be qualified for the tax exclusion, an employee achievement award must be given in recognition of the employee’s length of service or safety achievement at a ceremony that is a meaningful presentation. Furthermore, the conditions and circumstances cannot suggest a significant likelihood that the payment is disguised as compensation. The employee is taxed to the extent that the cost (or value,
if greater) of the award exceeds the employer’s deduction for the award. The
employer’s deduction for employee achievement awards for any employee in any year cannot exceed $1,600 for qualified plan awards and $400 otherwise. A qualified plan award is an employee achievement award that is part of an established written program of the employer, which does not discriminate in favor of highly compensated employees. Also, the average award (not counting those of nominal value) may not exceed $400.
For 2018 and later, the definition of “tangible personal property” that may be
considered a deductible employee achievement award is modified. As a result, tangible personal property does not include cash, cash equivalents, gift cards, gift coupons or gift certificates (other than arrangements conferring only the right to select and receive tangible personal property from a limited array of such items pre-selected or pre-approved by the employer), or vacations, meals, lodging, tickets to theater or sporting events, stocks, bonds, other securities, and other similar items. No inference is intended that this is a change from present law and guidance.
Moving Expense Reimbursement Exclusion Repealed
Qualified moving expense reimbursements provided by an employer to an employee are excluded from the employee’s income. Qualified moving expenses are payments received by an individual from an employer as a payment for or reimbursement of expenses by an employee that would be deductible as moving costs under §217 if directly paid or incurred by the individual.
From 2018 through 2025, the exclusion from gross income and wages for qualified moving expense reimbursements is repealed except in the case of a member of the Armed Forces of the United States on active duty who moves under military order.
Travel Per Diem Rates
Years ago, in R.P. 2011-47, the service set forth general rules for using federal per-diem rates to substantiate expenses for away from home business-related travel. Since then, the IRS has annually issued updates of these per-diem rates. For 2018, Notice 2017-54, effective on and after October 1, 2017, is such an update explicitly addressing the rates for the transportation industry, meal and incidental expenses, and high-cost localities under the high-low substantiation method. Under this notice, transportation industry meals and accidental expenses rates are $63 for in the continental U.S. and $68 for travel outside the continental U.S. The incidental-expenses-only deduction per-diem rate remained unchanged at $5 per day. And, under the high/low method, the per-diem rates for travel to any high-cost locality are $284 and $191 for travel to any other location within the continental U.S.
Work Opportunity Tax Credit (WOTC) – §51
Section 51 has a history of expanded and contracted coverage together with expiring and reinstated effective dates. As a result of the PATH Act, the provision now provides a work opportunity credit (formerly known as the targeted jobs credit) for employers hiring individuals from one or more of nine targeted groups before January 1, 2020 (§51(c)(4)).
Note: From 1998 thru 2006, taxpayers were allowed a welfare-to-work credit
was approved for 35% of the first-year wages and 50% of the second-year
wages paid to long-term family assistance recipients. However, due to the
similarities, the welfare-to-work credit (former §51A) was incorporated into
the work opportunity credit (§51) for recipients beginning work after December 31, 2006 (§51(d)(1)).
The employed individual must be a member of a targeted group. These
(1) qualified TANF recipients (§51(d)(1)(A)),
Note: An eligible recipient is an individual certified by a designated local
employment agency as being a member of a family eligible to receive bene-
fits under the Temporary Assistance for Needy Families Program (“TANF”) for a period of at least nine months, part of which is during the 18-month period ending on the hiring date.
(2) qualified veterans (§51(d)(1)(B)),
Note: Prior to the “VOW Act” (see below), there were just two subcategories of qualified veterans: (1) veterans eligible to receive assistance and entitled to a maximum credit of 40% of $6,000 of first-year wages, and (2) veterans eligible for a service-connected disability compensation and entitled to a maximum wage credit of 40 percent of $12,000 of qualified first-year wages.
As a result of the VOW Act, there are now five subcategories of qualified veterans.
(3) qualified ex-felons (§51(d)(1)(C)),
Note: A qualified ex-felon is an individual certified as: (1) having been convicted of a felony under any State or Federal law; and (2) having a hiring date within one year of release from prison or the date of conviction.
(4) designated community residents (§51(d)(1)(D)),
Note: A designated community resident is an individual certified as being at
least age 18 but not yet age 40 on the hiring date and as having a principal
place of abode within an empowerment zone, enterprise community, renew-
al community or a rural renewal community.
(5) vocational rehabilitation referrals (§51(d)(1)(E)),
Note: A vocational rehabilitation referral is an individual who is certified by
a designated local agency as an individual who has a physical or mental disability that constitutes a substantial handicap to employment and who has
been referred to the employer while receiving, or after completing certain
vocational rehabilitation services.
(6) qualified summer youth employees (§51(d)(1)(F)),
Note: A qualified summer youth employee is an individual: (1) who performs
services during any 90-day period between May 1 and September 15; (2) who is certified by the designated local agency as being 16 or 17 years of age on the hiring date; (3) who has not been an employee of that employer before;
and (4) who is certified by the designated local agency as having a principal
place of abode within an empowerment zone, enterprise community, or renewal community.
(7) qualified food and nutrition recipients (§51(d)(1)(G)),
Note: A qualified supplemental nutrition assistance program benefits recipient is an individual at least age 18 but not yet age 40 certified by a designated
local employment agency as being a member of a family receiving assistance
under a food and nutrition program under the Food and Nutrition Act of
2008 for at least six months ending on the hiring date.
(8) qualified SSI recipients (§51(d)(1)(H)), and
Note: A qualified SSI recipient is an individual designated by a local agency
as receiving supplemental security income (“SSI”) benefits under Title XVI of the Social Security Act for any month ending within the 60 days
ending on the hiring date.
(9) long-term family assistance recipients (§51(d)(1)(I)).
Note: A qualified long-term family assistance recipient includes an individual
certified by a designated local agency as being a member of a family that has
received family assistance for at least 18 consecutive months ending on the
Employers must obtain certification that a new-hire is a targeted group member to claim the WOTC. To do so, the employer must file Form 8850,
Pre-Screening Notice and Certification Request for the Work Opportunity Credit, with their state workforce agency within 28 days after the employee begins work.
No credit is allowed for qualified wages paid to employees who work less than 120 hours in the first year of employment. Besides, The loan is not
available to qualifying tax-exempt organizations other than those employing
qualified veterans. Finally, credit is not allowed for wages paid to a relative or
dependent of the taxpayer or an individual who is a more than 50% owner of
The amount of credit available to an employer is determined by the amount of qualified wages paid by the employer. Generally, qualified wages consist of payments attributable to service rendered by a member of a targeted group during the one-year period beginning with the day the individual begins work for the employer (two years in the of an individual in the long-term family assistance recipient category).
The credit available to an employer for qualified wages paid to members of
all targeted groups except for long-term family assistance recipients equals
40% (25% for the employment of 400 hours or less) of qualified first-year wages.
Generally, qualified first-year wages are qualified wages (not in excess of
$6,000) attributable to a targeted group member during the one-year period
beginning with the day the individual started working. Therefore, the maxi-
mum credit per employee is $2,400 (40% of the first $6,000 of qualified first-
For qualified summer youth employees, the maximum credit is $1,200 (40%
of the first $3,000 of qualified first-year wages). Except for long-term family assistance recipients, no credit is allowed for second-year wages.
Note: For summer youths, it applies to wages paid during a 90-day period
from May 1 to September 15.
Special Long-Term Family Assistance Recipients Calculation
In the case of long-term family assistance recipients, the credit equals
40% (25% for the employment of 400 hours or less) of $10,000 for qualified
first-year wages and 50% of the first $10,000 of qualified second-year
wages. Generally, qualified second-year wages (not in excess of $10,000)
are qualified wages. Thus, the maximum credit per employee is $9,000
(40% of the first $10,000 of qualified first-year wages plus 50% of the first
$10,000 of qualified second-year wages).
Special Veterans Calculation as a Result of “VOW”
The “VOW to Hire Heroes Act of 2011” (“VOW”), modified the work
opportunity credit with respect to qualified veterans, by adding additional
subcategories. As a result, there are now five subcategories of qualified
(1) those eligible to receive assistance under supplemental nutrition-
al assistance program (for at least a three month during the year prior to the hiring date) entitle the employer to a maximum credit
of 40% of $6,000 of qualified first-year wages;
(2) those eligible for compensation for a service-connected disability,
and hired within one year of discharge entitle the employer to a maxi-
mum credit of 40% of $12,000 of qualified first-year wages;
(3) those eligible to compensation for a service-connected disability
and has been unemployed for an aggregate of at least six months during the one year period ending on the hiring date entitle the employer
to a maximum credit of 40% of $24,000 of qualified first-year wages;
(4) those unemployed for at least four weeks but less than six months
(whether or not consecutive) during the one-year period ending on the
date of hiring entitle the employer to a maximum credit of 40%t of
$6,000 of qualified first-year wages; and
(5) those unemployed for at least six months (whether or not consecutive) during the one-year period ending on the date of hire, the maximum credit equals 40% of $14,000 of qualified first-year wages.
A veteran is an individual who has served on active duty (other than for training) in the Armed Forces for more than 180 days or who has been discharged or released from active duty in the Armed Forces for a service-connected disability. One Hundred Twelfth Congress of the United States of America
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