Auto Mileage for S Corp

[Brian EA]

For the last 30 years or so I have been deducting Auto expenses using the actual method based on the business mileage proration and depreciating the vehicle if it is owned by the individual/corporation. Last week, I picked up a new client who said that her previous tax preparer used the mileage rate for the last 10 years.
I keep wondering if I was using the incorrect method all along. She insists that I use the mileage rate deduction for the S Corporation.
I cannot find any information to confirm this.
Can anyone help or suggest where I should look? The TaxBook does not provide any info.
Thanks
Brian

[kathyc2]

It's treated differently depending on if shareholder/employee owns the vehicle or if the corp owns it.

If shareholder owns, corp can reimburse them and take as a deduction standard rate for substantiated business usage, same as they would any other employee.

If corp owns, they take actual expenses and then the shareholder/employee either needs to make reimbursement to corp for personal usage, or gross up W2 to account for it, same as any other employee.

[Snaggletooth]

[QUOTE=The TaxBook does not provide any info.
[/QUOTE]

Tax Book probably does provide some information, but TTB is not going to force a decision between the two.

Those who can afford it, really want the government to pay for their big $100,000 honkin' truck. That's what is behind the entire thought process. If you are preparing payroll, or advising others to do so, if you tell them they have to put part of the truck expense onto their W-2, you will probably get fired. They want this huge truck to save them money on their taxes, not to create income.

There is also the perception that if they use actual expenses, they won't have to keep up with mileage. And if the business use at some point falls below 50%, they don't want to hear what happens then.

I tell my customers that over time the "actual" method (which includes depreciation) will cost them money, and I believe this will be true 95% of the time. I strongly encourage them to simply use mileage. I've even had some of them want to take actual expenses, and then switch to mileage after the actual method drops down. I believe the choice for any given vehicle locks the door behind them.

[kathyc2]

if you tell them they have to put part of the truck expense onto their W-2, you will probably get fired.

It doesn't really matter if they like it or not, it's the law. It's better to have them reimburse the personal use amount to corporation to save on both employee and employer FICA.

[Snaggletooth]

It doesn't really matter if they like it or not, it's the law.

Correct, if they don't like it and we are in a position to treat it properly, We should insist on W-2 treatment or reimbursement or withdraw from the engagement. However, if we DO insist, we will most likely be fired. They didn't buy this gas-guzzling truck with the idea of increasing their taxes - their mindset is to get the government to subsidize the enormous cost.