Paul Turcotte shares a really helpful graphic from the Social Security Administration, and discusses the impact of FICA taxes on flat rate car allowances. When you don't have solid accounting practices for your car allowances, they're treated like income and FICA taxes come off. But there's a better way; use an IRS-compliant vehicle reimbursement program, like: • Cents per Mile • 463 Accountable Allowance • Fixed and Variable Rate (FAVR)
𝗜𝘁’𝘀 𝗻𝗼𝘁 𝗷𝘂𝘀𝘁 𝗶𝗻𝗰𝗼𝗺𝗲 𝘁𝗮𝘅 𝘆𝗼𝘂 𝗹𝗼𝘀𝗲 𝗳𝗿𝗼𝗺 𝗰𝗮𝗿 𝗮𝗹𝗹𝗼𝘄𝗮𝗻𝗰𝗲𝘀, 𝗽𝗮𝘆𝗿𝗼𝗹𝗹 𝘁𝗮𝘅𝗲𝘀 𝗴𝗲𝘁 𝘁𝗮𝗸𝗲𝗻 𝗼𝗳𝗳 𝘁𝗼𝗼. But what goes into payroll tax? And what is “FICA”? FICA stands for “Federal Insurance Contributions Act.” It’s the primary federal payroll tax. FICA helps fund medicare programs and social security, helping retirees, individuals with disabilities and children. FICA funds some really helpful programs, but it is a nuisance when it’s taken off car allowance, because car allowances are supposed to be tax-free reimbursements. When you’re paying FICA taxes on car allowance, you’re losing up to 15.3% of the total value: 7.65% on the employer side, and 7.65% on the employee side. Although this tax is very helpful for individuals and the economy it shouldn’t come off of deductible reimbursements. This is where a tax-free car program can come into play. The IRS has created programs that allow for tax-free reimbursements for employee vehicles. You can get programs like: • Cents per Mile • Tax-Free Car Allowance (IRS 463 Accountable Allowance) • Fixed and Variable Rate (FAVR) And all of these programs allow you to take the FICA tax off your car allowances, and drive tax-free. See the graphic below to learn more about FICA tax. #Cardata #CarAllowance #SocialSecurity #Medicare #FICA #PayrollTax #Taxes Graphic provided by: Social Security Administration
