Conference 7.286::digital

    Statement from original "Death of Plan A" memo (Note 565.20):
    
>    3.  As required by IRS statute, the Fringe Benefit Valuation associated with an 
>    individual's personal use of a company provided vehicle will be calculated,
>    and any amount not covered by the personal use charge paid by each employee
>    will be included in the employee's W-2 form.
    
    ...
    
>          Q:  How is the Fringe Benefit Value computed?
>         
>          A:  The Fringe Benefit Value is determined using a computation 
>              which includes total annual mileage and total personal mileage.
>	       The Internal Revenue Service has a published set of tables which
>	       are used in the computation.
>         
>              For example, an individual drives a fleet vehicle 20,000 miles
>	       per year; 8,000 miles of which are personal.  In this example, 
>	       the percentage of personal use is 40%.
>         
>              The Fair Market Rental Value of this vehicle is $3,100 per the 
>	       IRS table.  Based on the percentage of personal use, ($3,100 x 
>	       40%), the fixed Fringe Benefit Value in this example is $1,240.
>	       Added to this number is a 5.5 cent fuel adjustment from the IRS
>	       table.  In this example, ($0.055 x 8000 personal miles) the 
>	       variable Fringe Benefit Value is $440.  
>         
>              The total annual Fringe Benefit Value in this example is $ 1,680.
>         
>              This assessment is then reduced by amount of personal use 
>	       charges paid during the year.  In this example, let's assume 
>	       that you paid $30 per week for 52 weeks.  The net Fringe Benefit
>	       Value that would be assessed to your W-2 form would be $120 
>	       ($1,680 less $1,560 [$30 x 52 weeks]).
>         
>         
>          Q:  Is the Fringe Benefit Value different for each employee?
>         
>          A:  Yes.  The Fringe Benefit Value is determined by a combination of
>	       the percentage of personal use and the number of personal miles
>	       driven.  Those individuals with high business mileage and low 
>	       personal mileage will have a lower FBV. 
>

    As of October or so, Fleet was saying that the FBV business should
    NOT affect your W-2 for this year (1988).  The first W-2 with this
    adder should be 1989 and should cover usage from November 1, 1988
    until October 31, 1989.
    
    At least, this was what I was told at the time.  If this has changed,
    I'd love to know about it.

  Re: .2
    
 >   As of October or so, Fleet was saying that the FBV business should
 >   NOT affect your W-2 for this year (1988).  The first W-2 with this
 >   adder should be 1989 and should cover usage from November 1, 1988
 >   until October 31, 1989.
    
    Where did they decide on this particular time frame, does anyone
    know?  I would think that they would want to match it to the calendar
    year for tax purposes.
    
    Doug

    re: .3
    
    Just a guess, but if they followed the calendar year, I doubt that
    they could gather all the data quick enough to get it on a W-2 by
    the end of January (as the law requires).
    
    Many people I know hold expense reports for a week or two (or more...)
    so the chances that Fleet could receive all end of December reports
    by January 21 and still manage to produce accurate numbers in time
    for W-2s are basically nill, I would imagine.
    
    -- Russ

    I did a DIR/TITLE=CAR on this conference, and it appears that this is
    the proper note to ask this question in.  Is the information given in
    .1 still accurate for this (1990) tax year?
    
    I think I'm confused.  Say you get a company car, and for the sake of
    simplicity, say you've had it since Jan 1 this year.  By the end of the
    year (Dec 31), say you've put 20K miles on it.  For purposes of
    illustration, say that of that 20K miles, 12K were "personal" and the
    remaining 8K were "business".
    
    How does one estimate what kind of tax liability one might have (at
    least "ballpark") at the end of the year?  Yes, I realize that depends
    on your tax bracket, number of dependants, and the phase of the moon,
    but given the example above, what the the additional amount (above and
    beyond basic salary) that one would be expected to pay tax on?  And if
    the example above were approximately true (much more "personal" miles
    than "business" miles), is there a way to figure out at what point Plan
    "B" might be a more beneficial option to the employee?  (And for Plan
    "B", I assume the employee is then responsible for paying the tax on an
    even $2400; ie, $200/month * 12 months)?
    
    Thanks
    Jon

I have the algorithim used to make this calculation, I will post it when
I locate it...

Lee

    re: .5
    
    .6 will post the correct alogorithm, I'm sure, but it basically goes
    like this:  Calculate the percentage of personal use your car by
    dividing the personal miles by the total miles.  Multiply that fraction
    by the fair rental value of the car (I don't know this number offhand, 
    but it's a few thousand dollars) and subtract the total of your $30/wk 
    contributions (presumably $1560).  The result is added to (or subtracted 
    from) your total income on the W2.  Making the assumption that the
    marginal tax rate on your income is 28%, your tax liability is .28*FBV.
    
    On plan B, you are liable for taxes on the $2400 a year you receive. I
    made my decision to go to plan B when my job changed such that I was no
    longer travelling long business distances each day.  My milage was 
    basically commuting to the tune of 18 miles per day.  I would have been 
    liable for basically the entire fair rental value of the car and would have
    been giving the company probably $20/per week to make up the difference
    in gas expense.  Although there might have been a slight financial
    incentive to stay with the company car, I looked at it as an opportunity 
    to purchase the kind of vehicle I really wanted at a small incremental 
    expense to myself.
    
    Al
    

    re: .7
    
>    ...the fair rental value of the car (I don't know this number offhand, 
>    but it's a few thousand dollars) 
    
    Last figure I received was $3100 per year.
    
    Also, your computation omits the fact that you must add in $.055 (5.5
    cents) per personal mile.
    
    so:
    	FBV = ($3100 * (Personal Miles/Total Miles)) - (Weeks * $30) +
    			($.055 * Personal Miles)
    
    The FBV is then treated as added income, so you would figure your
    federal and state/local percentages based on your current income
    bracket.
    
    -- Russ

    
    RE: � Note 683.7                        FBV for car?                            7 of 8
	� ALOSWS::KOZAKIEWICZ "Shoes for industry"          24 lines  Sun, 29-Apr-90  2:14
    
    � On plan B, you are liable for taxes on the $2400 a year you receive. 
    
    ..but wait....before you run off and pay those taxes don't forget to
    deduct the percentage of your maintenance costs that pertain to the
    business use.....even if you business use is 10%, you can reduce the
    $2400 and pay taxes on less....thus pay less taxes.....
    
    

    re .8
    
    Whoa!  So in other words, say that for an annual 20K miles, if 1K is
    business and 19K is personal, that in addition to the FBV (which
    would be FBV_value - 52*30), you would have to add in $1045 (19K *
    .055) to be taxes on??  Yow....
    
    Jon

Re:  .10  TIXEL::ARNOLD  Are you sure?

>>> Whoa!  So in other words, say that for an annual 20K miles, if 1K is
    business and 19K is personal, <<<

If memory serves, 
business use of the car must be at least 50% for ANY deduction for business use.
Don't have the tax guides handy... anyone else seem to recall that?
\Gary

    re: .11
    
    This isn't a tax deduction question -- it's the Plan A FBV calculation.
    
    re: .10
    
    I got stuck paying taxes on about $3K of FBV income (I live about 50
    miles from the office).  Ain't the tax man wonderful?
    
    Your example:
    
    	Calculate   ($3100*.95) - ($30*52) + ($.055*19000)
    		=     $2945.00  -   $1560  +    $1045
    		=                   $2430
    
    It is left as an exercise to the reader to determine his/her tax based on
    an increase of $2430 in income.
    
    -- Russ

  The formula shown in .12

 	Calculate   ($3100*.95) - ($30*52) + ($.055*19000)

  is almost correct. The full formula, I believe, is 

 	Calculate   ($3100*.95) - ($30*52) - FC + ($.055*19000)

  where FC = any "fuel charges for vacation, holiday, or long weekend use."
  Regrouping this, it's

	FBV = (value to you) - (amount paid via weekly Vehicle Expense Summary)

  We get to use the $3100 figure because the IRS has allowed Digital to use a
  single value for the entire fleet. If they hadn't, then the calculation for
  each of us would vary based on the value of the car we're driving.  And that
  number is actually multiplied by N/52 (N=number of weeks on Plan A), which
  is 1 if you've been on the plan all year.

  My gut feeling, even though I fall into the high personal percentage category
  due to a long commute distance, is that I'm better off on Plan A than I would
  be on Plan B where I'd have to worry about maintenance and insurance. But I'm
  certainly open to arguments to the contrary.

	/Marvin

Re: Note 683.13 by SICML::LEVIN

�  My gut feeling, even though I fall into the high personal percentage category
�  due to a long commute distance, is that I'm better off on Plan A than I would
�  be on Plan B where I'd have to worry about maintenance and insurance. But I'm
�  certainly open to arguments to the contrary.

    I'm not equipped to argue one plan versus the other, but it seems that
    it's *because* you have a long commute that Plan A may be better.
    Face it, if you had a short commute then your maintenance would drop.
    
    From the calculation posted in .8 (and the amended version including
    FC), Plan A folks with high (dare I say even 100%) personal miles
    take a bigger hit on taxes (Plan B taxes are based on the addition
    of 12*$200=$2400) and probably take a bigger hit on the weekly cash
    flow - I don't have a long commute so would never be able to put
    $30/week in my car.
    
    Plan B folks take a bigger hit because of insurance and possible
    maintenance costs that appear over time. Of course, after X years
    you can sell your Plan B car and get a few thousand back.
    
    I doubt that it's possible to have a guaranteed formula for which
    plan is better, but it seems like if you have high personal miles
    you may be better off with Plan B. I hasten to add that it's still
    a roll of the dice nevertheless.

	BD�

    I have high personal miles due to my long commute.  Plan A is better
    for me because if I was on Plan B, I would spend ~$20K on a car I
    liked.  So my expenses would be (Car payment/year - $2400) + insurance +
    maintenance + tax on $2400/year - anything I could deduct as
    unreimbursed business expenses.  Plus, I would have to buy a new car
    every 2.8 years do to the Plan B mileage limitation.  Even if my car
    payment were only $2400/year, the cost of insurance (at the higher
    business use rate) + maintenance + tax on $2400/year - unreimbursed
    business expenses is > the addition tax I pay on the FBV of my Plan A
    car.
    
    Bob

    re: .13
    
    I cannot recall the inclusion of vacation gas in any FBV calculation
    memo I've seen, but this would make sense as it is money put into the
    vehicle to offset the cost of personal use.  Can't say for certain
    though.
    
    re: .14
    
    Yes, under plan B I would have equity in the vehicle at the vehicle's
    "retirement".  Unfortunately, I would end up "retiring" the vehicle
    after only 2 years or so (~35K miles/year), so the quick turn-around in
    vehicles would make Plan B much too expensive for me personally (when
    Plan A got the axe for a few months a while back, I spent some time
    analyzing my usage and came to the conclusion that Plan B was _very_
    painful in my case).
    
    -- Russ

    As far as the equity in your plan B car - remember you can buy the Plan
    A car when you turn it in for a pretty good price.
    
    My experience (almost 14 years with Plan A - except for the time period
    the Southern Area SWS forced all to Plan B) has been that the major
    issues to consider are:
    
    1.	cost of insurance (remember your Plan B insurance MUST be for
    	business use) in your area is a major factor (NJ personal insurance
    	on my wifes car is 3 times higher than Atlanta business insurance
    	was [same car])
    
    2.	ALL maintenance is covered on Plan A cars (oil changes, car washes,
    	tires, etc.) as well as all gas (except the 'vacation trips')
    
    3.	type of car available - you can pay for the options on your Plan
    	A car - but the choices are limited (Taurus, Pontiac 6000, etc.)
    
    4.	if you leave (or change to a non-eligible job) you lose car on
    	Plan A
    
    5.	either plan could change at any time
    
    -Barry-
    

    forgot to mention-
    
    If your major concern is the tax liability - talk to your tax advisor
    (accountant) about what you could do (on YOUR return) to offset the
    $2400/year income from Plan B.  In my case, I was advised to deduct the
    difference between the IRS mileage rate (think it was $.25) from the
    DEC mileage rate for Plan B ($.11 if I remember) for BUSINESS miles (I
    just kept copies of all my expense reports and added them up).
    
    Your deductible items (and the ease of calculations) will also be
    different if:
    
    1.	you lease or buy the car
    
    2.	if you buy for cash or finance
    
    3.	if you have another car for 'real' personal use and only commute
    	in the company car
    
    There may have been a discussion a long time ago about this in CARBUFFS
    or this file.
    
    	-Barry-
    

    Re .15 (Bob)
    
    Unless something has come out that I've not seen, there is no "mileage
    limitation" for Plan B cars - only age limit (5 years).

	BD�

    I know this is a late edition to the discussion but I just wanted to
    input my situation into this matter. I have been on plan b for 2.5
    years now and I personally come out a lot better.  I drive about 25000
    miles a year total with about 50% being business.  The $2400.00 a year
    (200.00*12) for 2.5 years equals $6000.00. Over the last three years on
    my taxes I have Saved about $3500.00 that would have gone to Uncle Sam.
    This figure comes from my business miles multiplied by the allowed
    deduction for business milage.  The total after taxes I have been
    reimbursed for my vehicle is $9500.00. I paid $17000.00 cash with no
    financing. I just traded for another vehicle and was given $8500.00
    wholesale for my old one. NOw 17000-9500=7500 and I was given 8500 for
    the vehicle.  So far I'm $1000.00 to the good. Now I have not had any
    maintenance except for usual stuff such as one set of tires.(300.00).
    Oil changes, one set of brakes.(100.00) and insurance which of about
    500.00 a year.  Oil changes have been about 100.00 total for the
    duration.  Now lets add, 300.00 for tires plus 100.00 for brakes plus
    100.00 for oil changes and about 1250.00 for insurance.  This totals
    out to about 1750.00 and then subtract the 1000.00 left over after
    trading and this leaves 750.00.  So, the best I figure is I drove the
    vehicle for somewhere around $750.00 for 2.5 years.
    
    Now lets look at the other side which plan A.
    First the business use was 50% 25000miles total 12500 was business
    30.00/week * 52weeks = 1560.00 / yr. * 2.5 years = 3900.00
    3100.00 * 50% = 1550.00/yr * 2.5 years = 3875.00
    12500 miles/yr * 2.5 yrs = 31250 personal miles * 5.5 cents/mi = 1700.
    1700 plus 3875 = 5575.00 total taxation
    5575.00 - 3900 already paid (30*52) = 1675.00
    This is what you would pay taxes on and if you are in the 28% bracket
    then you would have a tax liability of about $500.00.
    
    
    So as you can see, at this point there has not been that big a
    difference between the two plans.  This is a true situation.  A cheaper
    car would have made it even more promising toward plan b.  
    
    personally I like plan B because I dont have to go around town in a
    station wagon.  I dont care for station wagons.  Now maybe if DEC would
    let us use sedans like Sales people do then I might think again.  The
    new APV van would not be a bad choice once you get in the vehicle
    because they sure are ugly on the outside.  
    
    Anyway, I think its more of a personal preference as to which plan to
    choose. Latest rumor is that they may increase the amount to 300.00 a
    month and this will shed a new light on the subject.  See you then.
    
    Rick
    

    Re -1.
    
    This is the third or fourth time I have heard about this rumor of an
    increase to $300 under Plan B.
    
    Any one out there have any other hot "rumors" regarding a change in the
    plans.
    
    Frank

        re: .20
    
    	If you are in plan B and get the package, then you get to keep
    	your car, but you are out the bucks.  If you are in plan A and
    	get the axe,  you have to give back the car, but you get to 
    	keep the money (17,000);  It looks like to me that plan A is
    	better, cause you get to draw interest on your 17k while
    	driving around in a rental car.  (Plan B is only better at
    	the end of the five years, when you get all of you money
    	back out of the plan.  Plan A accumulates money into the
    	car as you go - but all cars do this (gas, oil, tires...)
        Plan B people have more to loose, because they have (up front)
        already invested in a Plan that only pays back (fully) when the
        term of the plan is up ( five years).  In the mean time, they
    	get to buy gas, oil, tires.
    
    	The decision is yours, but Plan A looks better to me.