Contact UsS-Corp Reimbursement by IRS mileage rate after Shareholder claimed actual expenses on vehicle for his Schedule C business?
I have a client who has filed a Schedule C and has been taking actual expenses on his vehicle. He has now formed an S-Corp with another shareholder, and the S-Corp adopted an accountable plan which reimburses shareholders for business use of their vehicle using the IRS standard mileage rate. Is this something that is going to cause a problem? I know you cannot use the standard mileage rate if you:
Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS,
Claimed a Section 179 deduction on the car,
Claimed the special depreciation allowance on the car,
Claimed actual car expenses after 1997 for a car you leased,
Obviously, its not the same taxpayer who claimed actual expenses but is now claiming the SMR. But can he be reimbursed this way by the S-Corp?
It may be relevant to note that the S-Corp was formed mid-year, and the Schedule C that will be filed to account for the shareholder's business activities prior to the creation of the S-Corp will necessarily include his vehicle expenses for the period prior to the S-Corp. He also took bonus depreciation on this auto.
Claimed a depreciation deduction for the car using any method other than straight line, for example, MACRS,
Claimed a Section 179 deduction on the car,
Claimed the special depreciation allowance on the car,
Claimed actual car expenses after 1997 for a car you leased,
Obviously, its not the same taxpayer who claimed actual expenses but is now claiming the SMR. But can he be reimbursed this way by the S-Corp?
It may be relevant to note that the S-Corp was formed mid-year, and the Schedule C that will be filed to account for the shareholder's business activities prior to the creation of the S-Corp will necessarily include his vehicle expenses for the period prior to the S-Corp. He also took bonus depreciation on this auto.
TaxConnections Members... Answer This Question
Want To be One of Our Tax Experts? Register Here
Tax Professional Answers
John Stancil
The corporation rightly followed it's policy of reimbursement under an accountable plan. However, the complicating factor here is that the taxpayer has previously accounted for business mileage use on this vehicle using actual expenses. The taxpayer should report his actual expenses on Form 2106 (assuming he is an employee) and deducting the reimbursement received from the corporation.
If he is not an employee, he should be.
Leave a Comment
367 weeks ago
If he is not an employee, he should be.