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taxmanrog
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
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Experience:  Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
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I am writing from a business owners view point. Due to credit

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I am writing from a business owners view point. Due to credit issues with the owner of the company, credit ratings are inefficient to get a auto loan, and credit card. One of our employees bought a "company" truck using his name and also a credit card in his name that he uses for business purposes only. How are we supposed to handle this as far as legitimate accounting practices? We have in the past just paid the note & credit payments through the business account, but have been told that this is not proper accounting practice. We also give a reimbursement for the additional cost to his insurance for the company vehicle. He only uses the company truck for work related instances, he has another vehicle that he uses for personal use. Do you have any information for me on how to legitimately handle this situation in case of a IRS audit?
Submitted: 1 year ago.
Category: Tax
Expert:  taxmanrog replied 1 year ago.
Welcome to Just Answers! Thank you for giving me the opportunity to assist you! I will do my best to help!

Did the employee pay for the truck? Or did he finance it? This is important. If the employee paid for the truck, he could simply sell it to you and you could make payments to him. This is perfectly legal. But in order for this to happen, he would have to have title to the truck, so that he could sell it to you. Without the title, it is a bit more sticky.

If the employee financed the truck himself, you could still enter into a purchase agreement, or lease agreement, with him, allowing you to operate and use the truck, with you making payments to the employee until the loan is paid off, at which point the employee "sells" you the truck for $1 or some other bargain purchase amount.

As far as the credit card is concerned, that is an easy one. Every month, when the employee receives the credit card statement, have him fill out an expense report, listing everything on the card that was for a business purpose. Then write him a check to pay for the items that were charged, and he can then pay the credit card company. By using an expense report, there is a reportable accounting of what was spent, so the reimbursement is considered to be under a form of an "accountable plan" so these payments would not be taxable to the employee.

I hope this answers your questions! If you have any more, please feel free to ask! If you have found my answer helpful, please rate me highly! I would appreciate that!

Thanks again! Have a great weekend!

Roger
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 391
Experience: Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
taxmanrog and other Tax Specialists are ready to help you
Customer: replied 1 year ago.


Thank you! He has financed the truck I like the sell to us thing.


What about the portion of his insurance that we pay for him?


 


Jeni

Expert:  taxmanrog replied 1 year ago.
That as well is a reimbursement. Have him include it on an expense report for your paper trail.

Roger
taxmanrog, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 391
Experience: Licensed CPA, MA, MST with 29 year's experience. Teach Accounting and Tax courses at Masters level.
taxmanrog and other Tax Specialists are ready to help you

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