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Employee business expenses can be claimed only by Armed Forces reservists, qualified performing artists, fee-basis state or local government officials, and employees with impairment-related work expenses.

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 Employee Business Expenses to deduct the vehicle expenses which exceed the reimbursement, if any.

To enter unreimbursed employee expenses in your TaxAct® 1040 return:

  1. From within your TaxAct return (Online or Desktop), click Federal. On smaller devices, click in the upper left-hand corner, then click Federal.
  2. Click Other Adjustments in the Federal Quick Q&A Topics menu to expand, then click National Guard/Reserve member from Form 2106 or Qualified performing Artist or Fee-Basis Government Official from Form 2106.
  3. Click + Add Form 2106 to create a new copy of the form or click Edit to review a form already created.
  4. Continue with the interview process to enter all of the appropriate information.

This method is not available to corporations or partnerships; however, it may be available to the individual shareholder or partner for their individual return depending on the circumstances. For confirmation on this, please contact the IRS at 800-829-1040.

Note that any link in the information above is updated each year automatically and will take you to the most recent version of the document at the time it is accessed.


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