Pers use of auto - not on W2

[KJ Judd]

New client (from regional CPA firm) in past had personal use of auto listed on his return as income subject to SE. (No clue why they didn't include on his W-2.) The prior accountant would calculate a value to include here.

Client has 1500 personal miles. How would I calculate? Using the cents per mile method doesn't seem right. Help! (I'm definitely suffering from last week of tax season brain cramp.) Thanks.

[veritas]

DIMS!

I would use the mileage rate and add to the w2 as if it was tip income so he pays one half of se tax.

[Harvey Lucas]

Another way

The old CPA probably put it on Sch C and had him pay SE tax on it because....the W2 was already done..probably by a payroll process firm...but point is, W2 was already done....old CPA did not want to amend the W2 filing...far simpler to put it on Sch C...the net tax result is exactly the same....putting it on Sch C as he was preparing the clients 1040 took him a few extra keystrokes and it was done....amending W2 would have involved multiple steps, ie, telling client it's wrong, possibls contacting payroll firm to fix it...wait for it to get fixed..follow up to see if it did get fixed..etc, etc, etc...

My vote is put it on Sch C for 2005 just like the old CPA did...calc it at smr...tell client to advise payroll firm to start doing it right in 2006.

HarveyLucas

[Bettie Cheek]

Personal Use Of Auto

We have this dilemma in our office too. It is not the fault of the taxpayer. It is the fault of the accountant (CPA or whomever) prepared the W-2 not bothering to know that it should be included in the W-2. The results are not the same either. The t/p is paying all of the SE tax rathe than one/half plus the cost of the additional tax preparation. The other dilemma is 1009 misc with the vehicle on Rents. So do you put it on the Sch C to write off the mileage , etc and then he pays SE on the balance or do you just list it on line 21 and use the expense as an adjustment to income and he pays no SE.

[Harvey Lucas]

Your Goal

Your goal as a busy, busy busy tax pro, with mountains of tax returns piled on your desk, is to have the client pay the correct amount of tax with the least amount of "trouble" for you...

Does the client want to pay to redo all the W2's, contact his employer and make a stink about what he believes to be an incorrect w2, wait for a fix, etc, etc.

Report an amount on Sch C that will result in him paying the correct amount of SE tax for his personal use of the auto....what is the downside risk to this approach? If there is an audit IRS would/should see that he used his best effort to pay the correct tax even tho he was saddled with an incorrect w2...they may contact employer to fix it...but then again they may (probably) would not.

HarveyLucas

[Gretel]

I agree with Bettie: T/P pays too much taxes having it on Sch. C and not enough if on L.21.

Of course, once you have a messed up W-2 you try to minimize the damage.

But I believe, the point Betty was making is that some payroll providers should care a little more about details to not create a mess in the first place. It's not about the easy way out of everything.

[veritas]

Put it on the tax return as unreported tips. I would never do Sch C.

[Harvey Lucas]

Hey, wait a minute

How about another thought....how do we know the w2 is wrong?...what if the personal use of auto has already been factored into his box 1, 3, and 5 wages??

When we get a w2, do we aotomatically assume it is wrong?...Usually the opposite is true!

Did the client say to you....I know I have personal use of my company auto...and I know for sure it is not included in my box 1,3,5 w2 wages and thus I want to put it on my tax return in such a way as to pay some tax on it??

What if you just took the w2 and assumed it was correct? The responsibility for its correctness is with the employer.

If there is an audit, it will be the employer who may have to fess up and pay.

It is not your job to assume the w2 is wrong. If you took this position then where do you stop....do you need to audit the employer to see if there are other items that should be included on the w2 as taxable???..if you took this approach you would never get a tax return done.

HarveyLucas

[Jesse]

New client (from regional CPA firm) in past had personal use of auto listed on his return as income subject to SE. (No clue why they didn't include on his W-2.) The prior accountant would calculate a value to include here.

Client has 1500 personal miles. How would I calculate? Using the cents per mile method doesn't seem right. Help! (I'm definitely suffering from last week of tax season brain cramp.) Thanks.

Aren't you the one that said it's wrong in the first place?

[KJ Judd]

Client's prior returns had an amount listed for personal use of auto as other income subject to self employment tax. Client told me when they gave me the info that I would need to calculate the personal use & gave me total miles & personal miles. I left a message for them on why this hasn't been included on W-2 & recommending that it is done so in 2006 and beyond.