S corp auto expenses

[imjulier]

I've just always been confused on how to handle vehicles in the s-corp. Single shareholder S corp who reimburses themselves at standard mileage rates out of the corporation. Should the vehicle be entered in Asset entry (in ATX) and reported in section B of the 4562 or can mileage reimbursement be claimed as auto expenses without doing this. Shareholder, not Scorp, owns the vehicle. Thanks for your feedback.

Julie

[TAXBILLY]

Have the corporation set up an accountable plan with the shareholder. Shareholder reports mileage and corporation pays him. Not income to the shareholder but a deduction to the corporation.

taxbilly

[imjulier]

Taxbilly-

So if an accountable plan exists no reporting on the 4562?

Thanks,

Julie

[OldJack]

I've just always been confused on how to handle vehicles in the s-corp.

You must remember that a S-corp is a separate legal entity from the shareholder. If an employee, other than the shareholder, was reimbursed for S-corp business use of the employees personal owned auto it would simply be an expense for the corporation and not taxable to the individual. There is no difference if the employee happens to be a shareholder. You can't capitalize and depreciate the shareholders personal auto unless there is a written financial lease between the two for the vehicle.

[OldJack]

Taxbilly-

So if an accountable plan exists no reporting on the 4562?

I have never seen in government published tax documents where it say what an accountable plan must say, or that it must be in writing. Since the IRS has no example of such, I would not consider myself competent to writing one either.

It is generally understood that to be reimbursed from a corporation, one must "account" for the expenses with appropriate receipts as to who, what, where, when, and why, the expense would be deductible by the corporation in order to actually be deductible and not taxable to the individual. If an officer of a corporate business reimburses himself personally for expenses that he accounted for and were qualify for business deduction, I would argue that the corporation reimbursed the employee under an accountable plan even though there is no written plan in existence.

[TAXBILLY]

http://www.taxalmanac.org/index.php/Treasu...%2C_Sec._1.62-2

taxbilly

[OldJack]

http://www.taxalmanac.org/index.php/Treasu...%2C_Sec._1.62-2

taxbilly

This article makes exactly my point inthat there is not a requirement for a written plan as such. It is what substantiation would be required if the corporation was making the business expense on its own rather than reimbursing an employee. Most corporations use an expense reimbursement form for the employee to fill-out and attach his receipts in order to get reimbursed. The form documents the old who, what, where, when, and why. I have yet to find a small corporation that has a written plan document.

clip from the article:

>>(2) Accountable plans—(i) In general. Except as provided in paragraph ©(2)(ii) of this section, if an arrangement meets the requirements of paragraphs (d), (e), and (f) of this section, all amounts paid under the arrangement are treated as paid under an “accountable plan.”

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[TAXBILLY]

It's not an article. It is the reg.

taxbilly

[OldJack]

It's not an article. It is the reg.

taxbilly

Well, I thought it was an article quoting the reg, but whatever. Are you saying that you disagree with my statements that a written plan as such is not required?

[TAXBILLY]

I make no claim one way or the other. The reg, as you suggested, is not clear.

taxbilly