Discussion:Automobile Expense
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| 21 June 2005 | |
| I would like to verfiy certain deductions. Assume I have a client that uses an automobile for his business 80% of the time; however, he registrated the car personally and is paying for the entire car's expenses through the business.
My approach is to take the entire amount of the auto expense on the corporate return (1120/4562), and 1099-misc (box 3) the employee for the remaining 20%; keeping 100% of the deduction on the books. Is this correct? | |
| 22 June 2005 | |
| Employees should never get a 1099-MISC. Any additional compensation should go on the employee's W-2. The business cannot deduct depreciation if it does not own the car, so I don't see how the corp could take a deduction for all of the expense. | |
| 22 June 2005 | |
| Because the answer to your query involves determining the deductibility of expense and reporting of income between related parties (i.e. an employee/shareholder and his or her corporation) relating to your specific set of facts, I would recommend that you review IRS Publication 15-B specifically the section relating to Fringe Benefit Valuation Rules | |
| 23 June 2005 | |
| The corporation should have an accountable plan to reimburse the employee/share-holder for the 80% business use. The corp takes the 80% deduction and the EE/SH claims employee business expense on his Sch A, subject to 2% limitation, reducing the expenses by the reimbursed amount. | |
| 26 December 2005 | |
| I have clients asking about vehicles all the time and it is so hard to dedicde the best way to go. Should the business own the vehicle or should they own it personally? What are the insurance implications and the sales tax issues if the vehicle is owned personally and leased back to the business? I'd love to have someone give me a good across-the-board answer to this. One thing I do tell clients without fail, keep a log, keep a log, keep a log. JimCPA, I'm confused by your answer. Are you assuming that the corporation owns the vehicle? Probably not if you are reimbursing the s/h. But, are you not getting a double deduction in your example? What is the s/h deducting on Sch A? If the s/h has accounted for business use and is reimbursed accordingly shouldn't it just stop there? The corp takes as a deduction the amount reimbursed and that's that?LJACPA 13:59, 26 December 2005 (CST) | |
| 27 December 2005 | |
| I agree with LJ...if the corporation pays the 80% to the s/h as a reimbursement, then the deduction is already realized and cannot be deducted again except perhaps for depreciation on the vehicle? If the 80% includes the depreciation allowance, then it is paid in full I would assume? | |
| 28 December 2005 | |
| Sandysea, where would depreciation be deducted? I agree that this is simply an accountable plan that the corporation gets a deduction for and the employee/sh does not have to do anything other than provide the appropriate records/log. The s/h would not have a deduction if reimbursed for the accounted for business use.LJACPA 11:01, 28 December 2005 (CST) | |
| 29 December 2005 | |
| IN EITHER CASE, ONE SHOULD ALWAYS PUT IN ANNUAL MINUTES ALLOWING THE FORM OF BUSINESS REIMBURSEMENTS. THIS WILL HELP IN MOST CASES DURING AN AUDIT-
AS LONG AS THE REIMBURSEMENT METHOD MEETS THE IRS RULES. | |
| 29 December 2005 | |
| Would not the depreciation on the vehicle be taken as unreimbursed employee business use of the vehicle? If the s/h is receiving only a portion of the expenses, then could he not take the depreciation as unreimbursed? | |
| 2 January 2006 | |
| Sandysea, it sounds like you are trying to deduct the personal use of the vehicle. You've already been reimbursed for the business use, so the rest of the 'use' would be personal and not deductible anywhere.LJACPA 12:41, 2 January 2006 (CST) | |
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