1120s milage

[DONNA ASTON]

I am working on a tax return that claimed mileage for an S Corporation the year prior. I don't know how to approch this . How would i fix it this year.

[Snaggletooth]

Does Not Compute

Donna, can you reword your question?

[DONNA ASTON]

The previous tax returns that were filed have a calculated mileage deduction in the auto expense line. I have always used acutal expenses for a S Corp unless there is reinbursement for mileage. The Client is asking why I need acutal expenses as he has always provided mileage to the accountant in the past. I just want to make sure I am on the right track here. I am new to this message board and trying to get the hang of it. Thanks for your patience.

[ChEAr$]

A key question here

The previous tax returns that were filed have a calculated mileage deduction in the auto expense line. I have always used acutal expenses for a S Corp unless there is reinbursement for mileage. The Client is asking why I need acutal expenses as he has always provided mileage to the accountant in the past. I just want to make sure I am on the right track here. I am new to this message board and trying to get the hang of it. Thanks for your patience.

Is this: does the corporation own the car? Or does the corporation reimburse owner for use of personal auto?
If it is the latter, there had better be a written policy somewhere, something that authorizes corporation to do so. Minutes of the board of directors would cover this usually.

That's my plan and I'm sticking to it. My S corporation reimburses me 54.5 cents per business mile that I periodically bill it for.

BUT... if the corporation owns the vehicle, only actual expenses are to be used,
and with adjustment on W2 at end of year for personal miles.

[gkaiseril]

> BUT... if the corporation owns the vehicle, only actual expenses are to be used, and with adjustment on W2 at end of year for personal miles.

If the employee/owner reimburses the corporation for the personal use of the vehicle, there is no need for an adjustment on the W-2.

[Jiggers]

Mileage

The previous tax returns that were filed have a calculated mileage deduction in the auto expense line. I have always used acutal expenses for a S Corp unless there is reinbursement for mileage. The Client is asking why I need acutal expenses as he has always provided mileage to the accountant in the past. I just want to make sure I am on the right track here. I am new to this message board and trying to get the hang of it. Thanks for your patience.

I wonder how the prior return preparer booked the mileage. What was the journal entry? We know debit to mileage expense, credit to what?

A corporation must use the actual expenses if the vehicle is owned by the corporation.

A corporation can reimburse the shareholder/employee using a mileage rate, usually the IRS approved mileage rate, for vehicles not owned by the corporation. But the mileage must be substantiated.

[DONNA ASTON]

Thank you for your responses. This vehicle is not in the company name and there is no plan in place and yes mileage was calculated based on the number of business miles driven in that particular year with a statement of calculation attached to the tax return. That caught my eye and started the ball rolling down hill that is.

As for the journal entry I probably will never know because my company did the clean-up for 2008 using balances forward from Sch L on the tax return. If we had to guess because that was a question asked we thought shareholder equity account??

I knew the answer to this but sometimes it is so unreal you second guess yourself. Don't know it any of you have been there!!

[JohnH]

How about a debit to Mileage Expense or Vehicle Expense and a credit to the Due to/From Sharholder account or a similar liablity account?

[ChEAr$]

> BUT... if the corporation owns the vehicle, only actual expenses are to be used, and with adjustment on W2 at end of year for personal miles.

If the employee/owner reimburses the corporation for the personal use of the vehicle, there is no need for an adjustment on the W-2.

Last time I looked that up, if the owner is majority stockholder, then his reimbursement for W2 must be calculated as percentage of actual expenses instead of his reimbursing for mileage. It may have changed. ?

[Snaggletooth]

Cash Payment

The best way to handle a "mileage" deduction for a corporation is for the owner of the vehicle to submit the mileage to the corporation for payment.

The corporation can make payment to the owner at the prescribed IRS mileage rate. The payment is fully deductible by the corporation and tax-free to the owner. If the corporation's tax year is over, the payment may be accrued.

The only warning here is the mileage must be supported. (See "Accountable Plan" in The Tax Book or other publications) If the shareholder sticks his head in your office and says, "Oh, by the way, I drove 16,238 miles for the corporation last year" he should produce support for that number and not simply pull it out of the air.

Donna from Albuquerque, welcome to the Tax Book message board. Give us a question and good information and we'll try to help.

Snaggletooth

[DONNA ASTON]

Thanks for the welcome. I think a yell is all I am going to get if I am lucky from this account. Cash payment it what I suggested but first the minus sign needs to disappear fr the bank account. I noticed you are writing from TN. I was in Memphis two weeks ago visiting family when the weather was nice.

[geekgirldany]

Donna I have seen maybe three S-Corps done the same why. It actually looked like they were prepared like a Schedule C with no regards to the corporation status.