mileage expense in an S-corp

Technical topics regarding tax preparation.
#1
zl28  
Posts:
2067
Joined:
22-Apr-2014 10:27pm
Location:
usa
have a guy with a company

he has 2 clunker cars
and 2 leased cars

his payments for auto lease, insurance etc is 8k

his deduction if he took 53.5 cents per mile is 13k

how would one reflect the above items on an s-corp return.
 

#2
Posts:
300
Joined:
2-Aug-2016 6:12pm
Location:
Wasilla, AK
If he owns the vehicles (not the S-Corp), he can submit an expense report to the S-Corp and be reimbursed up to the standard mileage rate. This is deductible for the S-Corp, and nontaxable to the owner-employee.
 

#3
zl28  
Posts:
2067
Joined:
22-Apr-2014 10:27pm
Location:
usa
thank you Mschmahl...company owns the cars.
 

#4
WEISSEA  
Posts:
2076
Joined:
21-Apr-2014 5:20pm
Location:
California and Nevada
how would one reflect the above items on an s-corp return.

The leased vehicles must use the std mileage rate for the life of the lease. So S corp deducts lease payments and std miles rate for business miles. Lease deduction is lease payments less an IRS table inclusion amount(if FMV more than $19K) times business use %. Since no actuals, insurance or fuel or maintenance not deductible.
 

#5
JR1  
Posts:
6043
Joined:
21-Apr-2014 9:31am
Location:
Western 'burbs of Chicago
Mileage AND Lease? Not so sure about that.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#6
Posts:
300
Joined:
2-Aug-2016 6:12pm
Location:
Wasilla, AK
If I am reading Rev. Proc. 2010-51 correctly, the standard mileage deduction is only available for employees (including reimbursement arrangements) and the self-employed. Corporate owner-employees are not considered self-employed, so SMR is unavailable for company-owned vehicles.

I disagree with WEISSEA and agree with JR1. Lease (less inclusion amount) is deductible, plus other actual expenses. The total is multiplied by the business use percentage.Correction: see my post below.
Last edited by MSchmahl on 22-May-2018 6:02pm, edited 1 time in total.
 

#7
JR1  
Posts:
6043
Joined:
21-Apr-2014 9:31am
Location:
Western 'burbs of Chicago
Yep, as MS says.
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 

#8
Posts:
2318
Joined:
21-Apr-2014 10:39am
Location:
Los Angeles, California
MSchmahl wrote:If I am reading Rev. Proc. 2010-51 correctly, the standard mileage deduction is only available for employees (including reimbursement arrangements) and the self-employed. Corporate owner-employees are not considered self-employed, so SMR is unavailable for company-owned vehicles.

I disagree with WEISSEA and agree with JR1. Lease (less inclusion amount) is deductible, plus other actual expenses. The total is multiplied by the business use percentage.


For corporate owned vehicles with personal use, is the total multiplied by the business use, or is the personal use included as wages using one of the fringe benefit valuation methods - lease value rule, cents per mile rule, or commuting rule?

This situation has all kinds of alarm bells ringing. What is ordinary or necessary about a business owning 4 vehicles?

But assuming that it passes the smell test, I would say the company deducts the actual expenses, and the employee gets wages, likely under the lease value method.
 

#9
Posts:
300
Joined:
2-Aug-2016 6:12pm
Location:
Wasilla, AK
Now that I think more upon it, and refer to Publication 15-B, it looks like 100% of the business vehicle is deductible. Any personal use is a fringe benefit, and must be included as taxable income in box 1 of the employee's W-2. There are three ways to determine how much to include in the employee's taxable income.

  1. Cents-per-mile
    Multiply the standard mileage rate by the number of personal miles driven. This option is available if (1) the FMV of the vehicle is less than an annual amount set by the IRS, (2) the vehicle is used more than 50% for business, and (3) the vehicle is driven at least 10,000 miles total during the year.
  2. Commuting rule
    Value the fringe benefit at $1.50 per commute (i.e. $3.00 per day). This option is available if (1) there is a written policy that the employee cannot use the vehicle other than for business and commuting use, (2) the employee actually follows the policy, and (3) the employee is not a "control employee". This option doesn't cover owner-employees, because of the "control employee" requirement.
  3. Lease value rule
    Multiply an annual lease value from a table based on the FMV of the vehicle by the percentage of personal use. If the employer provides fuel, add 5.5 cents per personal mile, or actual cost, to the total. It doesn't look like there are any restrictions on whether this rule can be used. This is probably the most taxpayer-friendly way of accounting for an owner-employee's use of a corporate vehicle.
  4. Actual FMV of the benefit
    This is actually first in Pub. 15-B, but I put it last because nobody sane would use this. It requires actually finding out what the employee would have to pay for an equivalent use of the vehicle from a third party.
 

#10
WEISSEA  
Posts:
2076
Joined:
21-Apr-2014 5:20pm
Location:
California and Nevada
Agree, corporations must use actuals( was think of LLC which can use std) and bsuiness gets 100% deduction with personal use on W-2 using ALV method also sublect to FICA.
Seems like if leased and using actuals then cannot use depreciation,correct?
 

#11
Posts:
300
Joined:
2-Aug-2016 6:12pm
Location:
Wasilla, AK
Correct, leased vehicles cannot be depreciated for tax purposes; they must be owned. Part of the lease payments account for depreciation.
 

#12
Posts:
3299
Joined:
21-Apr-2014 7:01am
Location:
Near the fridge.
Please don't forget that the rules about "leased" vehicles have buried in them (and it's not buried very deep) a distinction between *operating* leases and *capital* leases, and don't forget, also, that the definitions of those two terms differ between GAAP and tax, and IIRC those definitions also have changed somewhat over the past forty or more years.

Everybody here who remembers having to learn FASB 13 when it was new, raise your hand.

:D ;) :D
 

#13
JR1  
Posts:
6043
Joined:
21-Apr-2014 9:31am
Location:
Western 'burbs of Chicago
Just ignore him. Anyone EVER seen a car lease that was a capital lease? lol
Go Blackhawks! Go Pack Go!
Remembering our son, Ben Jan 22, 1992 to Aug 26, 2011.
For FB'ers: https://www.facebook.com/groups/BenRoberts/
 


Return to Taxation



Who is online

Users browsing this forum: CoastalCPA, deniz, golfinz, Google [Bot], Google Adsense [Bot], JAD, ManVsTax, MAPCPA60, mariaku, rkrcpa, SlipperyPencil, zl28 and 164 guests