Subcontractor Using Company Auto

[geekgirldany]

I have a client that is a subcontractor. Company is providing him a vehicle to use. He asked if the expenses (fuel, maintenance, etc.) he is paying are deductible. I am a little tired here... but I believe they are. Is that correct?

My only other thought would be why does not the Company provide reimbursements for the expenses provided that there is adequate accounting for them? This would be excluded from his SE income according to TTB. If I read correctly.

He then asked about signing his car over to the company so he will not have to pay such high insurance. He would be under the company's fleet policy. I don't even think that is an option.

Would appreciate any input.

Thank yoU

[Corduroy Frog]

Dos and Don'ts

There are all manner of inconsistencies which render interpretation difficult.

First of all, the concept of "accountable plan" is usually applicable to employees instead of independent contractors, but it doesn't have to be. However, the contractors is not driving his own car so the reimbursement rate ceases to be defined. The mileage rate is not split into various elements - gas, insurance, repairs, etc. although there IS a separate portion dedicated to depreciation but this applies to the operator using his OWN car.

The idea of "signing over" this vehicle to the company who already owns the vehicle?? This option seems to go in circles. If the vehicle is already owned by the company, its insurance company should insist on coverage and even if the operator provided a certificate of insurance the vehicle would still be listed on an "umbrella policy." Both the company and the contractor would be better off with the company paying the insurance, period.

It could be that the company does not want to pay 50+ cents per mile. Non-employee status means they can't add money to the contractors' W-2, and a 1099 is for cash payments only. Neither the company nor the contractor have planned this one out very well.

Since the "accountable plan" is tainted by the circumstances, the best option is for the contractor to 1)include all payments, including reimbursements, as revenue and 2)deduct all cash payments, including auto expenses, as ordinary and necessary expenses. Additionally, the contractor is not entitled to depreciation expense for a vehicle he does not own.

[geekgirldany]

Thanks so much for replying. He is from a foreign country so there might be some things lost in translation. He is wanting to sign over his own auto to the company for insurance reasons. I really don't get it. I am going to tell him as you suggested. Hopefully he will understand.

[Lion]

His situation is starting to smell a whole lot like "employee."