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View Full Version : Multiple Owner S-corp, how to make mileage fair?



GrindStone
01-19-2010, 06:42 PM
Hello,

We have 4 owners in our new S-corp. Does anyone have advice/experience on how to pay ourselves mileage, not the staff. Some drive more than others and while it is agreed the company should pay for mileage we thought $.55 is over generous on the acutal cost per mile driven that the other owners would be paying for.

After calculating I found gas, oil, car wash,tires, only comes out to about $.21/mile and I know there is increase in insurance and depreciation to add but I don't think that comes to another $.34/mile.

I know the fairest method for the company to pay would be actual receipts but coming up with a price per mile would be much more simple. The difference from $.55 could be taken on personal taxes, is that correct? Any thoughts?

Thanks ! :)

Steve B
01-19-2010, 07:11 PM
My thought is to follow the amount set by the IRS. I'm assuming they do a thorough job of evaluating costs based on a bunch of data to account for average cars etc. Since it's an outside party it seems the only fair way to do it.

phanio
01-20-2010, 04:52 PM
My first thought is the same as Steve B - use the IRS's standard - IRS Announces 2009 Standard Mileage Rates (http://www.irs.gov/newsroom/article/0,,id=200505,00.html)

First, this will keep it fair and two, it will keep your owners in line with the IRS - thus, there are no questions when you file. Would hate to see one or more of your owners not beable to claim the difference on their personal returns - especially if the IRS looks at it as an investment in the company.

If that is not agreeable - You should get together and vote (you seem to have some compeling research on what you think) - if you vote - include it in your minutes - everyone should be ok at that point.

Evan
01-20-2010, 11:59 PM
You can use either option. Mileage generally is most advisable because it's easier to track than a bunch of gas receipts, etc.

Problem with actual expenses is that there are big variances between what YOU pay for insurance and I pay. And if I want these nice super-duper tires, and another uses the cheapo -- you still have a discrepancy. Don't forget about the guy who has the clunker car that is always in the repair shop. Looks like the ACTUAL method could be more discriminatory!

The mileage rate factors all of that stuff in, and I'm not sure what basis you used to reach the conclusion it's around 34 cents a mile.

If you want to be real cheap, you could reimburse no owner, and let them take it on their 1040 Schedule A, as a miscellaneous itemized deduction (subject to a 2% haircut). I wouldn't advise this at all, as your company is also losing out on the DEDUCTION of 55 cents per mile (which YOU, individually will not get when you file your return, due to the haircut), which actually increases the income tax.

Why wouldn't you take the bigger expense? If you don't want to pay it out right now, just offset it to a note payable to the shareholder. At least it'd increase his basis.

GrindStone
01-25-2010, 03:03 PM
Thanks for all the input ! The 55 cents seems to make the most sense (haha knee slap).:D

Evan
01-25-2010, 03:20 PM
I never usually have clients who say they want to have higher net income so they can pay more taxes... :)

You could voluntarily just write a check to the US Treasury though if you'd like. Maybe you get order one of those big huge checks, and present it to someone official and make a big press release about paying the government more than you are taxed.

GrindStone
01-25-2010, 06:29 PM
Evan, that would be a funny. I remember hearing about the guy who was so upset at the increase in property tax that he paid his property tax in pennies. He had bags of them in wheel barrels, he called the news to be there and the tax office was not happy but they had to accept it and count it all. Now that's original, haha !!

What I was trying to ask was if we pay 30 cents to each other as owners paid through the company and take the extra 25 cents on private taxes.

Evan
01-25-2010, 11:14 PM
What I was trying to ask was if we pay 30 cents to each other as owners paid through the company and take the extra 25 cents on private taxes.

I wouldn't. If any of the shareholders don't itemize, they'll never see that 25 cents. Even if you all do, that 25 cents is reduced by 2% of your AGI. And seeing as your 30 cents is less than the 55 cent standard rate, you're actually doing more harm to yourself by making less of it deductible (as you have to exceed an even higher threshold).

huggytree
01-31-2010, 10:05 AM
id keep track of each of your milage's and use the .55 cent method...

my work truck is .55 or more...easy..i get 8 mpg and im lucky if i have only $1k in repairs a year...this year it was $4k...my accountant tells me i make out better having ME own the truck personally and getting the milage...ive argued that one out every year....this past year it definately was the wrong decision, but other years it was close....i spend $500 a month on gas.

Evan
01-31-2010, 01:22 PM
my work truck is .55 or more...easy..i get 8 mpg and im lucky if i have only $1k in repairs a year...this year it was $4k...my accountant tells me i make out better having ME own the truck personally and getting the milage...ive argued that one out every year....this past year it definately was the wrong decision, but other years it was close....i spend $500 a month on gas.

If this truck is 100% business use, which many trucks (often customized and such) are, actual costs usually is better for that reason. Plus you can depreciate the truck, and expense all the maintenance and gasoline, as they all really ARE business purposes.

In many instances, people have a car that they use for business, and it isn't 100% of the time. Mileage is usually always better there, because figuring out the percentage of use, and keeping track of gas/maintenance, etc. and then doing the math is simply not worth the aggravation.