Shareholder mileage expense and no payroll

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Here is yet another mileage expense reimbursement question for a >2% s corp shareholder.

If no payroll has been taken (advised to do so immediately), can the shareholder charge mileage expense for his personally owned vehicle for business miles under an accountable plan?

Or, if cannot be reimbursed under an accountable plan because of no salary, can they claim it on their personal return as an employee expense subject to 2% on Sched A? Are they still considered an employee for the purpose a 2106 misc deduction without any salary taken?

Last year their previous accountant took a full mileage deduction on a Schedule C even though the company was then an S Corp. She did an 1120S and a Sched C. Quite horrifying!

[ChEAr$]

Shareholders

Here is yet another mileage expense reimbursement question for a >2% s corp shareholder.

If no payroll has been taken (advised to do so immediately), can the shareholder charge mileage expense for his personally owned vehicle for business miles under an accountable plan?

Or, if cannot be reimbursed under an accountable plan because of no salary, can they claim it on their personal return as an employee expense subject to 2% on Sched A? Are they still considered an employee for the purpose a 2106 misc deduction without any salary taken?

Last year their previous accountant took a full mileage deduction on a Schedule C even though the company was then an S Corp. She did an 1120S and a Sched C. Quite horrifying!

do not get to take mileage expenses anywhere. I am a shareholder of several companies and there's no reason for me to drive anywhere on company business.

In my own corporation, I am 100% shareholder, but even that fact entitles me to no mileage deduction. However... since I am an officer and employee I may submit
for mileage reimbursement from my corporation beCAUSE there is a written accountable plan in place.

In short, don't confuse shareholder with employee.

And in your particular clien'ts case, without any salary last year, client would be hard pressed to hold himself out to IRS as such, thus any deduction for car expenses would be denied.

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shareholder not an employee

Well, that is a good point and makes perfect sense to me. No salary, then you're not an employee. This inherited client has also taken distributions in excess of basis so they are in for many surprises this tax year.

That's the way it goes. I've about had it with clients using their S Corps as their personal checking accounts. Thanks so much for your input.

[Gretel]

Harlan

I'd like to add a question here.

Would it be OK for S-Corp. to pay gas for vehicle owned by 100% S/H (first year=no salary but takes salary now)?

[ChEAr$]

Yes

I'd like to add a question here.

Would it be OK for S-Corp. to pay gas for vehicle owned by 100% S/H (first year=no salary but takes salary now)?

I could live with that, provided the reimbursements were done on a periodic basis AND
during the year in question, iow, not after the fact.

This is distinguished from the use of an accountable plan as mentioned above which is the chief vehicle by which employees are reimbursed for actual expenses.
When I use my personal credit card to buy something for my corporation, the corporation is the one which pays the credit card company for the purchase. This may involve two different payments online to VISA maybe, from corporate account and personal checking account, but it's doable.