­Automobiles are some of the most significant investments of businesses. Mismanaging them can significantly affect the performance of your company. Furthermore, improper valuations of these assets will substantially affect the accuracy and reliability of your financial statements. These issues are some reasons for you to get the services of a reputable accountant or CPA.

A well-trained accountant can apply various accounting principles to get the correct value of your automobiles. They can also help you assess the correct tax effect of these assets. This service is especially helpful, considering that the IRS often updates its policies when it comes to valuing assets. This article posted on the Journal of Accountancy on the 5th of February 2009 discusses some samples of these changes. 

IRS Updates Maximum Values for Employee Automobile Use

The IRS has updated for 2009 the maximum allowable value of an employer-provided vehicle for which the cents-per-mile and fleet-average rules may be used in determining the value of an employee’s personal use of the vehicle as a taxable fringe benefit.

Revenue Procedure 2009-12, issued by the Service on Wednesday, specifies that the maximum permissible fair market value of vehicles eligible for the cents-per-mile valuation rule is $15,000 for passenger automobiles and $15,200 for trucks and vans. For employers using the fleet-average valuation rule, the limit is $19,900 for both categories of vehicles. The limits are for vehicles first made available to employees for personal use in calendar year 2009. Click here to read more…

The article above focuses on some changes in the maximum amount businesses may value their vehicles. This policy can affect your taxes as it has a direct effect on the depreciation that you can recognize annually. A decade after the article above, the IRS once again updates its policies. This article posted By Sally P. Schreiber on the Journal of Accountancy explains these changes.

Final rules determine maximum vehicle values

The IRS updated the fleet-average and vehicle cents-per-mile valuation rules described in Regs. Secs. 1.61-21(d) and (e), respectively, to align the limitations on the maximum vehicle fair market values (FMVs) for use of these special valuation rules with recent statutory changes made to the depreciation limitations in Sec. 280F (T.D. 9893). The regulations finalize, without substantive change, proposed regulations (REG-101378-19) issued in May 2019.

Consistent with the substantial increase in the dollar limitations on depreciation deductions under Sec. 280F(a), the regulations increase, effective for the 2018 calendar year, the maximum base FMV of a vehicle for use of the fleet-average or vehicle cents-per-mile valuation rule to $50,000. Click here to read more…

As we can see from the articles shown above, accounting for your automobiles can sometimes be a headache. Having someone to keep track of IRS’s policies for you can help you make sure your tax returns are correct. These can help you avoid hefty fines that can affect your business in the long-term.

AldarisCPA offers top-of-the-line accounting services to businesses of all sizes. We offer bookkeeping and tax preparation services to help you manage your business taxes. Request an appointment with us by clicking here now.