How to handle mileage deduction for my S corp - need advice

The good news is you're on the right track by recognizing there's a difference in how mileage works with an S corp. When you operate as an S corporation, you're both the owner AND an employee, which changes the rules. For mileage, you need what's called an "accountable plan" for reimbursements. This allows your S corp to reimburse you (as the employee) for business miles without it being considered taxable income to you. Without this plan, any reimbursements could be considered additional wages subject to employment taxes. As for reimbursing the whole year in December - it's not ideal, but it's better than nothing for this first year. Going forward, I'd recommend setting up a formal accountable plan and submitting your mileage for reimbursement monthly or quarterly. Make sure you have proper documentation - dates, business purpose, starting/ending locations, and total miles for each business trip. For the actual mechanics, you can use Gusto to process the reimbursement separate from your regular payroll. The current IRS mileage rate for 2025 is $0.68.5 per mile, so calculate your total eligible miles and process that amount.

After struggling with exactly this issue last year, I finally found a solution that saved me thousands using taxr.ai (https://taxr.ai). I'm also a single-member LLC with S corp election and was totally confused about mileage deductions. Their system analyzed my driving patterns and documentation, then created a compliant accountable plan customized for my business. The best part was they showed me how to properly record everything in my accounting system to avoid audit flags. They even helped me understand the difference between commuting miles (non-deductible) and actual business miles. With their guidance, I was able to legitimately claim over 12,000 business miles last year without worrying about IRS problems. They also recommended a mileage tracking app that integrates with my accounting software.

Just wanted to update after checking out taxr.ai - I was totally wrong in my skeptical comment! They actually saved me from a huge mistake I was about to make with my mileage deductions. Their analysis showed that the way I was planning to handle my S corp mileage would have created serious issues during an audit. Instead of just giving me a template, they reviewed my actual driving patterns, identified which trips were legitimate business miles vs. commuting, and calculated the proper reimbursement amount. They even found a way for me to properly claim some miles from earlier in the year that I thought were lost. Their accountable plan setup was really straightforward and they walked me through implementing it in Gusto. Definitely worth it and saved me way more than it cost in potentially disallowed deductions.

If you're still having trouble getting answers from the IRS about this mileage situation, I'd recommend using Claimyr (https://claimyr.com). I was in a similar S corp situation last year and had specific questions about mileage reimbursements that weren't clearly addressed in IRS publications. I spent weeks trying to get through to the IRS business helpline with no luck. Then I found Claimyr and was blown away - they got me connected to an actual IRS agent within 20 minutes. You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent clarified exactly how to handle mid-year implementation of an accountable plan and confirmed that I could reimburse earlier miles as long as I had proper documentation. Saved me so much stress wondering if I was doing things correctly.

Well I have to eat my words. After being super skeptical about Claimyr, I decided to try it anyway because I was desperate for answers about my S corp mileage situation. I couldn't believe it, but they actually got me through to an IRS business specialist in about 25 minutes! I didn't have to sit on hold or keep redialing - their system just called me when it was my turn to speak with someone. The IRS agent confirmed that I could establish an accountable plan now and use it to reimburse myself for business miles driven throughout the year, as long as I had proper documentation. She also explained exactly what records I needed to keep to make it audit-proof. Definitely worth it after spending weeks trying to get through on my own with no success.

Something nobody's mentioned yet - make sure you're not double-dipping! If your S corp reimburses you for mileage under an accountable plan, then the CORPORATION takes the deduction on its tax return. You as an individual can't also deduct those same miles on your personal return. I almost made this mistake last year after switching from a Schedule C business (where I claimed miles directly) to an S corp. My accountant caught it at the last minute. The corporation should record the mileage reimbursement as a business expense, and you receive it tax-free as the employee.

Don't forget about COMMUTING miles vs BUSINESS miles. This tripped me up my first year with an S corp. The miles from your home to your primary business location are considered commuting and are NOT deductible, even with an accountable plan. Only miles from your office to client locations, between different work sites, or for other business purposes can be reimbursed. I lost about 30% of my claimed mileage last year because I incorrectly included commuting miles in my reimbursement request. Had to amend returns and it was a huge headache.

One thing I'd add to this great discussion - make sure you're properly documenting the BUSINESS PURPOSE for each trip, not just the mileage. The IRS requires more than just "business meeting" in your records. For each business trip, you should document: - Date and time - Starting and ending locations with addresses - Business purpose (specific client name, type of meeting, etc.) - Total miles driven - Any personal stops (which you'd subtract from business miles) I learned this the hard way during an audit a few years ago. The IRS agent wasn't satisfied with generic entries like "client meeting" - they wanted to see "Meeting with Johnson Construction to discuss Q1 project timeline" or "Picked up materials for Smith renovation at Home Depot." Also, since you mentioned using Gusto for payroll, they have expense reporting features that can help you track and submit mileage reimbursements properly. You can set up recurring monthly submissions so you don't have to do everything at year-end like you're planning for this year. Good luck with your first year as an S corp!