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Personal use of S-Corp owned vehicle

Hi Linda,

I am the sole owner of my S-corp.
The S-corp owns a vehicle that I use 80% for business,
and 20% for personal use. I understand that the personal use value must get added to my W-2. But does this mean I would also have to adjust my Federal and State 941 Quarterly Returns so that the total wages/compensation reported on those forms will be equal to the total wages/compensation shown on my W-2? If so, how would that be done? There must be an easier way to handle the situation.

Please help.

Thank you,
Eric

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Personal Use of Company Car

Hi Eric,

As you indicate, personal use of company car is wages that is subject to federal income tax as well as the other employment taxes.

IRS Pubication 15-B, Chapter 3 discusses the different methods for determining the value of the personal use. An easy one is to use the federal mileage reimbursement rate.

IRS Pubication 15-B, Chapter 4 discusses the withholding and reporting requirements. You can opt to report the use of the car on an annual basis. So you could report all of your 2008 personal use in December, which means you would included it in the Q4 941 wages & withholding.

To make this work in your payroll software you need to add a wage item that is fully taxable and then make an after tax deduction of the value of the personal use.

For instance, say the personal use of your car is $1200 and your December salary is $1500 and you withhold at the Married 0 rate. Your pay stub would look like this:

Gross Wages
Salary 1500.00
Taxable Benefit 1200.00
Withholdings
Income Tax -240.21
Social Security -167.40
Medicare -39.15
Company Car -1200.00
Total Deductions -1646.76
Net Pay 1053.24

This would be reported like all other wages on the Q4 941.

Does that help?
L:)

Reimburse SCORP for vehicle personal use??

Hi Linda,

Instead of modifying my payroll software to show the
additional wages for personal use of the company vehicle,
couldn't I just reimburse the S-Corp and be done? Would
that be easier, or is there a downside to handling it
that way?

Thanks Much!
Eric

Auto Reimbursement

Sure, but be sure to clearly document it. That means you should have documentation for all the miles you've driven your, both business & personal. Also be sure to note the purpose on the memo of the check.

This is why I think it's much easier to pay for the auto expenses personally & have the company reimburse you the standard mileage rate for business miles driven on your personal car.

L:)

Determining personal use value of vehicle

Hi Linda,

Thanks for your answer.
But I was under the impression that the "personal use" dollar value was calculated as the percentage of personal usage multiplied by the total auto expenses claimed on the 1120S return. Is this a legitimate method for figuring the dollar value of my personal useage?

Thank you!
Eric

Determining personal use value of vehicle

Yes, that's ok too. There are several methods for valuing the personal use.

L:)

Linda, I'd really like your thoughts.

Linda,
Does my question regarding personal use of S-corp owned vehicle make any sense? Can you offer any suggestions?
Thanks,
Eric

its very good

Very good article thank you...

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