Generally, the S-corporation reimburses the employee for vehicle expenses incurred when using their personal vehicle for company purposes. Corporate employers may not
use the standard mileage rate to compute the vehicle expenses for company-owned
vehicles. However, they may use the standard mileage rate in determining the reimbursement to employees for business use of the employee's vehicle. This reimbursement would be considered a business expense deducted on the S-corporation return. Conversely, if the vehicle is owned by the S-corporation, the business is only allowed to deduct actual
vehicle expenses (to the extent of business use). How to Report - Individual Return:
Employees have the option to use either the standard mileage rate OR actual expenses method. If the shareholder is considered an employee, the individual would then complete Form 2106 to deduct the vehicle expenses which exceed the reimbursement, if any. This deduction flows through Schedule A, Line 21 as a Miscellaneous Itemized Deduction and will be included in the total Itemized Deduction amount that appears on Form 1040, Line 40.
To enter unreimbursed employee expenses in your TaxAct® return:
- From within your TaxAct return (Online or Desktop) click on the Federal tab. On smaller devices, click the menu icon in the upper left-hand corner, then select Federal
- Click Itemized or Standard Deductions to expand the category and then click Unreimbursed employee expenses - Subject to 2% of AGI limit
- Click Yes on the screen titled Itemized Deductions - Job or Miscellaneous Deductions
- Click Yes on the screen titled Itemized Deductions - Deduct Form 2106 Expenses
- The program will proceed with the interview questions for you to enter or review the appropriate information. Both the description and amount will be reflected on Line 21 of Schedule A.
Please refer to Rev. Proc. 2006-49
for additional information. According to this revenue procedure, the standard mileage rate is for use by employees, self-employed individuals and other taxpayers. This method is not available to corporations or partnerships, however may be available to the individual shareholder or partner for their individual return depending on the circumstances. For confirmation on this information beyond Rev. Proc. 2006-49, please contact the IRS at 800-829-1040.