We have a very small corporation and our tax person tells us that "we--personally" have to pay for the work truck that is only used for the corporation.

She says at the end of the year that the corp. Can claim either the mileage of the truck or the actual expenses that were incurred and actual gas uses. Now I understand this aspect of the law but I do not understand why she tells us that we personally have to pay for the work truck out of our regular checking account?? It seems to me that the corp. Should pay for the truck?

She also tells me... "do not pay for the truck expenses such as repairs and maintenance or the truck payments out of the corp." is that right?? Thank you for your time.

Who owns the truck, that is how is it titled?

Also, is your corporation a "C" or a "S" corporation?

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Originally Posted by mlsnc

who owns the truck, that is how is it titled?

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We have titled it in our name but we could title it in the corporations name if that would make the corporation pay for it cause we are having to pay for it right now. Thanks for any help you can give me.

To tell you the truth I am not sure. We are a very small company and have only two employees, if that makes any difference. I will find out and let you know. Thanks for any help you can give me.

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Originally Posted by atlantataxexpert

also, is your corporation a "c" or a "s" corporation??

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We are a "c" corporation.

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Originally Posted by mlsnc

who owns the truck, that is how is it titled?

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We own the truck but we could put it in the corporations name if that would make the corp. Pay for it??

You need to account for your business miles to the corporation. You need a mileage log to do this properly. The corporation can then reimburse you based on the mileage rate. You could ask for reimbursement based on the actual cost, but if that reimbursement exceeds the mileage rate then the whole thing becomes compensation and should end up on your W-2 and it is subject to employment taxes.. You would then have to deduct the expenses as a business expense on Schedule A as a miscellaneous expense subject to a 2% limitation.

If you title the truck into the corporation (corporation pays all the bills), you still will have to account for your miles. Any personal use of the vehicle would then be put into your W-2 based on vehicle value, the IRS tables, and the percentage of use based on the log..

If you don't think you have to have a log then you need to read this case - Niyitegyeka, T.C. Summ. 2008-129.

Since you are owner/officer this is the way it will work for you. For other employees the log/compensation rules would be different and are easier.

I have clients that have their vehicles in the corporation and some have left them out due to the W-2 complications (and just reimburse based on miles). To be honest does everyone keep a log - no; does everyone get audited - no, but if you do not have one and you get audited it could cost you.

It gets a little complicated, but I hope this helps.