Employee-shareholder – more than 5%- driving S Corp vehicle 20% for personal use and Form W-2.

Forum|Forum|5 years ago
November 19, 2020
1 reply
72 views

The S Corp depreciates the vehicle and takes expenses for ONLY 80% (business use). Must the value of personal use be included on employee-shareholder’s Form W-2, Box 1?

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qbteachmt

Level 15

I think you mean to be using "2% Shareholder" as your measure for the employee that has a taxable fringe benefit from using this 100% company-owned vehicle for personal needs.

The corporation owns the car, and covers all costs, and gets the 100% tax deduction from it. Separately, the employee either Pays for the value of their personal use, or is Taxed on the value of that use.

Think it through first with no taxable fringe benefit to anyone.

Now, add into your mix the personal use, which is like a payroll Addition + Deduction. The amount as expense for taxable fringe benefit is Added to payroll, but the same Value is Deducted from payroll, too, to avoid paying it out as real funds. They already got the benefit of the use, so you do not want more funds paid out.

The difference is the taxable event's taxes. Not the Vehicle Benefit value; that isn't in the financial reporting twice.

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M

mlcpaAuthor

Level 3

Probably I’m missing something here, but I guess there are additional costs for example SS and Medicare. But this is not my point. I'm focus on the question whether the S Corp must include always the benefit on Form W-2 or there are other options.

My point is that personal use of a company vehicle is not qualified business use, even though the company properly reports employee-shareholder.

In my example the 20% personal use of the vehicle expenses is neither tax deductible for the S Corp nor the employee-shareholder. It looks similar whether the employee-shareholder owns the vehicle and does not request expenses reimbursement from the S Corp. Nobody takes income or expenses.

Thank you for sharing your point of view.

IRonMaN

Level 15

The correct road to follow is to report 100% of the costs on the Corp return and the value of the personal use goes on the employee’s W-2.

Slava Ukraini!

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