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William Ellis, CPA
William Ellis, CPA, CPA
Category: Tax
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Experience:  Over 15 years of experience in public accounting
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How are car allowances handled by a corporation when employees

Resolved Question:

How are car allowances handled by a corporation when employees want to use their personal car and be paid a car allowance instead of driving company's car?
Submitted: 3 years ago.
Category: Tax
Expert:  William Ellis, CPA replied 3 years ago.
Either companies are requiring mileage logs and receipts to include with expense reports, or they are using industry and regional averages to calculate the allowances.

Hope this helps,

Bill Ellis
Customer: replied 3 years ago.
How is the set car allowance handled as far as taxes? Does corporation take as expense and employee then files as income with itemized business expense?
Expert:  William Ellis, CPA replied 3 years ago.
What ever the company pays to the employee is taken as an expense. If the employee has greater expenses than they were paid, they can claim the difference as unreimbursed expenses. Generally, the only time an employee has income in these situations is if they have personal use of company cars. If that's the case, their W-2 is grossed up.

Thanks,
Bill
Customer: replied 3 years ago.
The point is the employee is wanting to use his personal car for company business and be paid a monthly car allowance.
Expert:  William Ellis, CPA replied 3 years ago.
That's not a problem, especially if the employee is not traveling overnight. The mileage and associated expenses commuting to the office are not deductible. Other business-related mileage and expense are reimbursable and deductible by the company.

What other questions do you have?

Thanks,
Bill
Customer: replied 3 years ago.
Which way would the corporation benefit most, owning autos for employees to use or paying allowance to employees to use their personal auto? I promise this is last question.
Expert:  William Ellis, CPA replied 3 years ago.
It's no problem at all. Umless the employees are driving junkers requiring a lot of repairs, the Company will definately benefit having employees use their personal vehicles and not buying a fleet of cars.

Thanks,

Bill
William Ellis, CPA, CPA
Category: Tax
Satisfied Customers: 296
Experience: Over 15 years of experience in public accounting
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