Odd Payroll Situation

TLCTX

An employee is going to be using the corporate card for his own purchases, and that is going to be considered part of his income.

What is the best way to ensure that this amount gets reported as income?

Please don't submit that this is right or wrong - that dosn't matter. I have no say in that. I just need to get it reported accurately.

Thanks a million!

HRforME

Someone is going to have to look at his credit card each month and cull out those transactions that are personal and tax him on that as a fringe benefit. I would do it at least on monthly basis to make sure he has enough other income to make up for the taxes owed.  You would add it into payroll as income and then subtract the same amount out as an aftertax deduction once taxes have been taken out.  The employer will still have to pay their portions of FICA, state unemployment and other local taxes.  You will need to have a plan in case the net pay is negative -- should he overspend and owe more taxes than pay.

There is no tax benefit to him for doing it this way.  And I would do everything in my power to stop this from happening. My only thought is that he is trying to hide income either from the IRS or his spouse.  But that income SHOULD show up in his W-2. 

p.s. does the credit card have a credit limit on purchases? I would calculate backwards to see what the largest amount he could have as a fringe that would not cause net pay to be negative and have the credit limit less than that.