- 1). Visit the IRS website and read about the types of taxes that fringe benefits are subject to. Generally these benefits are included in gross income and are subject to income tax withholding and employment taxes.
- 2). Consider how the use of a company car is valued as a benefit. Generally, comparing the terms of the benefit to the fair market value of a lease with similar terms provides an accurate measure.
- 3). Consider the increase in your gross income that use of the company vehicle as a benefit will cause. This increase, along with other sources of income, will be subject to income tax.
- 4). Read the IRS published income tax tables, found in the Form 1040 Instructions. These provide income tax rates for various levels of income.
- 5). Consider the value of using the company car, when compared to the tax liability and any tax increases the use might cause. The value of using the car generally outweighs the tax liabilities created by a significant amount, thus creating the benefit for the employee.
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