Can an S Corp Owner Receive Reimbursements for Section 179 Deductions?

   IRS regulation 1.62-2(d)(1) permits your S corporation to reimburse you for your employee expenses. The regulation identifies expenses suitable for reimbursement as those found in Part VI, Subchapter B, Chapter 1 of the Internal Revenue Code. Section 179 expensing is one of the many expenses in this section of the law that is identified as appropriate for reimbursement.

   So How Does This Work?

   For example, you purchase a used vehicle for $10,000. Your business cost is $8,000 based on your mileage log. You personally own the vehicle, but you want the corporation to claim Section 179 expensing on it.

   To make this work, you submit an expense report to your S corporation requesting reimbursement for your business expenses, this includes the amount of section 179 expensing. You must also submit to your corporation a mileage log that supports your business use of this vehicle. You must also submit a mileage log for each of the next 5 years, because this is the time during which your corporation could suffer Section 179 recapture if business use of the vehicle were to drop to 50% or less.

   The expense report and mileage log combination creates a tax-defined “accountable plan” that allows your corporation to deduct the expenses, and makes the reimbursements to you not taxable.

   Say you give your corporation a separate expense report just for the $8,000 Section 179 expense. Based on this request and the information from your mileage logs, the corporation writes a check to you for $8,000. The corporation deducts the $8,000 as a Section 179 expense as if it had purchased the vehicle itself, subject to the rules that apply to the corporation for its expensing.

   In general, your agreement with the S corporation will be for the corporation to reimburse all your actual vehicle expenses. If recapture should occur, your agreement could require you to reimburse the corporation for the recapture amount. Requiring the reimbursement is the easy way to handle this.

IRS Releases Smartphone App to Check Refund Status

   The IRS recently unveiled IRS2Go, its first smartphone application that lets taxpayers check on their status of their tax refund and obtain helpful tax information.

   Apple users can download the free IRS2Go application by visiting the Apple App Store. Android users can visit the Android Marketplace to download the free IRS2Go app.

   Get Your Refund Status

   Taxpayers can check the status of their federal refund through the new phone app with a few basic pieces of information. First, taxpayers enter a Social Security number, which is masked and encrypted for security purposes. Next, taxpayers pick the filing status they used on their tax return. Finally, taxpayers enter the amount of the refund they expect from their 2010 tax return.

   For people who e-file, the refund function of the phone app will work within about 72 hours after taxpayers receive an e-mail acknowledgement saying the IRS received their tax return.

   For people filing paper tax returns, longer processing times mean they will need to wait three to four weeks before they can check their refund status.

   Get Tax Updates

   Phone app users enter their e-mail address to automatically get daily tax tips. Tax Tips are simple, straightforward tips and reminders to help with tax planning and preparation. Tax Tips are issued daily during the tax filing season and periodically during the rest of the year. The updates cover topics such as free tax help, child tax credits, the Earned Income Tax Credit, education credits and other topics.

   IRS2Go is the latest IRS effort to provide information to taxpayers beyond traditional channels. The IRS also uses tools such as YouTube and Twitter to share the latest information on tax changes, initiatives, products and services through social media channels. For more information on IRS2Go and other new media products, visit http://www.irs.gov/.

 

It's a Whole Lot Easier to Keep Track of Mileage

If you use your car for business purposes, you may have learned that keeping track and properly logging the variety of expenses you incur for tax purposes is not always easy. Practically speaking, how often and how you choose to track expenses associated with the business use of your car depends on your personality; whether you are a meticulous note-taker or you simply abhor recordkeeping. However, by taking a few minutes each day in your car to log your expenses and mileage, you may be able to write-off a larger percentage of your business-related automobile costs.

Whether you buy or lease your vehicles, if you drive them for both personal-use and business-use, the IRS requires you to select ONE of the following 2 recordkeeping methods to write off the business-use portion of your vehicles. Each vehicle may individually use either of these 2 methods:

The “STANDARD MILEAGE METHOD” with 2 tracking options:

1) Track mileage daily all year = your annual totals
2) Track any average “90-day period” x 4 = annual totals

The “ACTUAL EXPENSE METHOD” by recording all vehicle operating expenses all year, then multiplying those totals by the mileage “business-use percentage” Actual expenses include: gas, oil, tires, repairs, maintenance, insurance, interest, registration fees, licenses, parking fees, tolls, and depreciation.

Listed below are a few ways to simplify the burden of logging your automobile expenses for tax purposes.

#1 ENVELOPE METHOD. The Envelope Method can help you keep track of both MILEAGE and EXPENSES at the same time. Keep in mind, however, that only one method may be used on your return at tax time. Here’s how it works: Keep an envelope for each month of the year in the vehicle that you use for business. No matter who is driving the vehicle, they can record accurate mileage or expenses and put the receipts in the envelope pocket for documentation. On the front of the envelope, make columns with these headings: Date, Destination, Purpose of Trip, and Trip Mileage. Each year you are required to record the odometer reading for each business vehicle on January 1st and December 31st. These numbers can be recorded on the first and last envelopes used each year for each vehicle.

If you want easy documentation for BOTH of these odometer readings, simply get your oil changed on December 31st each year. The sales receipt will record your Ending Odometer reading on the last day of the year, which can also serve as the Beginning Odometer reading for the first day of the New Year.

#2 THERE’S AN APP FOR THAT. There are several mileage tracker apps that have recently been released for all kinds of smartphones. A new app for the iPhone, automilez™, now generates mileage logs for you after each trip. It’s a GPS mileage logging and online log management service, so it measures your mileage for you; you just have to say what it’s for. If you use the pre-selected categories, it will even calculate the total tax deduction for the trip. The app will even email you the data. If you think this might be for you, it is available at no charge in the Apple store.

Another app that is available for the iPhone, as well as Google Android smartphones, is called MileBug. While Milebug isn’t free like automilez™, the app costs $1.99, it does have a solid following of 120,000 users. Milebug features include detailed reporting that shows totals by business and vehicle. Users can e-mail HTML and Excel-compatible reports. The mileage tracker is able to keep tabs on mileage for multiple businesses and multiple vehicles, and keep a running total of deductions with each addition to the user’s trip log.

#3 ON THE WEB. If you want more functionality, or you don’t have a smartphone, you can keep track of your mileage online using Logbook. Logbook is a web application that allows you to track and store mileage online. Logbook often has 30-day free trials, but it is currently available for $36 a year. http://www.automilez.com/logbook.htm

#4 VEHICLE GPS SYSTEMS. There are many vehicle GPS systems, such as ones by Garmin, that try to minimize the hassle of recordkeeping. All you simply have to do is turn on your GPS when you drive. These systems are then connected to your PC where your mileage logbook will automatically be downloaded. Many of these systems take the log file and turn it into a complete overview of your driven routes. They can calculate reimbursements, give you a PDF formatted mileage logbook, complete with driven miles, start and stop destinations, dates, and other information you need for proper documentation.

***Please note that you must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Generally, this is a minimum of 3 years from the date you file your return.***