Discussion:First Year S Corp Auto Depreciation / Reimbursement

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Discussion Forum Index --> Basic Tax Questions --> First Year S Corp Auto Depreciation / Reimbursement


Discussion Forum Index --> Tax Questions --> First Year S Corp Auto Depreciation / Reimbursement

Craigums (talk|edits) said:

22 April 2011
Hello all! Happy week after 4/18!

Here's my question. Client setup an s-corp as of 4/1/10. She owns the car - I think I'm good on how to setup the expenses, reimbursement, etc, but I have on question on how the depreciation will work since part of the year will be on a Sch. C (Jan-Mar) and the rest will be on the 1120s:

Under an accountable plan, we'll reimburse her for all qualified auto expense (including depreciation). Now, on the 2011 4562, will I just show depreciation for the first quarter? Is this cool? Are they going to think it odd that I only took $1,200 of depreciation on something that would normally be $4,800?

Thank you all - I attribute my survival from my first tax season on my own to you!

Thanks,

Craig

Marcilio (talk|edits) said:

22 April 2011
IRS is used to odd, so I wouldn't worry about that. One comment/question: The great majority of my clients benefit more by taking a mileage deduction rather than actual expense. Are you using the actual expense method because there are very few miles being put on the car?

Barry Manilow (talk|edits) said:

22 April 2011
When you say the corp is going to reimburse for actual auto exps including depr of the personal asset are you referring to a FAVR plan? If so, does the shareholder-employee even qualify for that type of plan?

Craigums (talk|edits) said:

23 April 2011
Marcilio - Previous accountant already took actual expenses on the Sch. C in 2010, so no go on mileage. Or is there an exception now that she's technically employed...

Barry Manilow - Car is 100% used for business but is in her name. Doesn't want to move it to the business because of dealing with the title when the car is financed. What's the best way to go about this?

Craigums (talk|edits) said:

25 April 2011
Other threads I've found seem to suggest there's nothing wrong with her keeping track of depreciation (and other actual expenses) and using an accountable plan. Anyone else care to weigh in on this one?

CathysTaxes (talk|edits) said:

25 April 2011
Craig, I believe either way is acceptable, but using actual expenses is more work on the shareholder's part and IME, you're lucky if you get these people to actually keep a mileage log. Plus what happens if she gets a new car and forgets to tell you about that? (I had a client trade in his truck and he never told me about that until a couple of years later).

Kyea (talk|edits) said:

26 April 2011
CathysTaxes-Even with the mileage option the tax filer has to determine the portion of the mileage rate that is depreciation and recapture it.

RoyDaleOne (talk|edits) said:

26 April 2011
Generally, there is no recapture on a trade.

CathysTaxes (talk|edits) said:

26 April 2011
But if it wasn't fully depreciated, I have a different vehicle with a different basis, but client never told me about it!

Craigums (talk|edits) said:

27 January 2012
LOL, the irony. She did get a new car and forget to tell me about it, but was a trade in, so no recapture, I would assume.

BUT, apparently usage fell to less than 100%, but we've been reimbursing for 100% all year.

If the accountable plan now shot? What are my options? Call the excess reimbursements distributions? (We're fine on off. comp. for the year.)

SHE IS LUCKY I LIKE HER AND SHE PAYS THE BILLS! =D

Craig

Craigums (talk|edits) said:

30 January 2012
Anybody?

Ckenefick (talk|edits) said:

30 January 2012
You can line item it under other expenses "Reimbursed Depreciation."

Craigums (talk|edits) said:

31 January 2012
Hi CK, thanks as always.

That was my plan, but while it was used 100% last year, it was used less than that this year. However, we've been reimbursing as though it were used 100% all year long. Any recommendations on how to reconcile the difference?

Doug M (talk|edits) said:

31 January 2012
Figure out the correct biz percentage, and put the excess reimbursement on the balance sheet as due/to from employee. And make them promptly repay the excess reimbursement.

Craigums (talk|edits) said:

1 February 2012
Thanks Doug. Yeah I suppose that works. Since we have enough salary to backup our distributions, any problem just taking them as distributions?

Doug M (talk|edits) said:

1 February 2012
I would have the person reimburse, as that is one the requirements under an accountable plan.

Craigums (talk|edits) said:

6 February 2012
K. Sounds like a plan.

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