How to properly deduct business mileage on S Corp tax return - W2 vs. Schedule C confusion

Both CPAs are partially right but also missing some important details. When you operate as an S Corp, your business expenses should be deducted at the corporate level, not on your personal return with a Schedule C. The correct way to handle business mileage in an S Corp is to set up an accountable plan for mileage reimbursement. Your S Corp should reimburse you at the standard IRS mileage rate for all business miles you drive using your personal vehicle. This reimbursement is a legitimate business expense for your S Corp and isn't taxable income to you. If you've been tracking your business miles (which I hope you have, along with dates and purpose), you can have your S Corp reimburse you for these miles. The corporation then deducts this as a business expense on its return. No Schedule C is needed on your personal return. What CPA #2 might be referring to is that as a W-2 employee, you personally cannot deduct unreimbursed business expenses anymore since the Tax Cuts and Jobs Act eliminated those deductions for most employees.

After dealing with similar S Corp mileage headaches, I found an amazing tool called taxr.ai (https://taxr.ai) that saved me tons of time and stress. It analyzed my situation and explained exactly how to handle business mileage reimbursements through my S Corp. The tool confirmed what the expert above mentioned about setting up an accountable plan, but it also helped me understand how to properly document everything to avoid raising red flags with the IRS. It even generated the right paperwork for my S Corp records to show the business purpose of my drives. Super helpful when my tax software didn't have specific spots for this info!

I need to eat my words about being skeptical! I just tried taxr.ai from the link above and holy cow - it cleared up my S Corp mileage confusion in minutes. It specifically addressed my question about driving from home to client sites and confirmed these ARE deductible business miles when the client location is temporary. The tool also explained that I needed to document the business purpose of each trip and have my S Corp reimburse me, exactly like the expert mentioned. It even generated a ready-to-use accountable plan template that I could customize for my business! Seriously wish I'd found this months ago before getting conflicting advice from different CPAs. Would have saved me a lot of stress and potentially thousands in missed deductions.

I need to eat my words about being skeptical! I just tried taxr.ai from the link above and holy cow - it cleared up my S Corp mileage confusion in minutes. It specifically addressed my question about driving from home to client sites and confirmed these ARE deductible business miles when the client location is temporary. The tool also explained that I needed to document the business purpose of each trip and have my S Corp reimburse me, exactly like the expert mentioned. It even generated a ready-to-use accountable plan template that I could customize for my business! Seriously wish I'd found this months ago before getting conflicting advice from different CP

Anyone else struggling to actually reach a human at the IRS to get a straight answer on S Corp mileage questions? I've been trying for WEEKS to get clarification because my situation is similar to the original poster's. I finally had success using Claimyr (https://claimyr.com) - it actually got me through to a real IRS agent within 15 minutes after I'd been trying for days on my own. They have this demo video that shows how it works: https://youtu.be/_kiP6q8DX5c The IRS agent confirmed everything about the accountable plan approach for S Corp owners. She explained that the mileage reimbursement needs to be documented as a business expense on the S Corp return rather than as a personal deduction. This was exactly what I needed to hear from an official source to feel confident in my filing.

I'm shocked but I have to apologize for my skepticism about Claimyr. After my frustrated comment, I decided to try it myself since I was desperate for answers about business mileage deductions. The service actually got me through to an IRS business tax specialist in about 20 minutes! I've been trying for weeks on my own with no success. The IRS agent walked me through the whole process of handling S Corp mileage reimbursements and confirmed that using an accountable plan is the correct approach. For anyone struggling with S Corp mileage questions like the original poster, getting official clarification directly from the IRS was incredibly helpful. They explained that CPA #1's advice about using Schedule C would definitely cause problems, and CPA #2 was wrong that you can't deduct the mileage at all.

Quick question - does anyone know if there's a minimum amount of business mileage that makes this accountable plan approach worth it? I have an S Corp too but only drive maybe 1,500 miles a year for business. Is it worth the hassle of setting up this system for that amount?

I just want to add that the vehicle reimbursement needs to be reasonable. I got audited last year because I reimbursed myself at $1.25 per mile (thought I could include vehicle maintenance costs separately). The auditor said the IRS standard mileage rate already includes maintenance, fuel, depreciation, etc. Had to amend my returns and pay penalties!

This thread has been incredibly helpful! I'm in a similar situation with an S Corp and have been getting conflicting advice about mileage deductions. One thing I want to add for anyone setting up an accountable plan - make sure you're also documenting the business purpose of each trip, not just the miles. The IRS requires substantiation of the business connection for any reimbursement to qualify under an accountable plan. I keep a simple log with: date, starting location, destination, business purpose, and total miles. For example: "3/15/24 - Office to ABC Client meeting - Discuss Q1 contract renewal - 47 miles." This level of detail has saved me during previous audits. Also, don't forget that if you use your vehicle for both business and personal use, you can only claim the business portion. The IRS is very strict about this, so accurate record-keeping is essential. For those asking about apps, I've had good success with MileIQ and Everlance - both automatically track your trips using GPS and let you categorize them as business or personal with a simple swipe.

This thread has been a goldmine of information! I'm dealing with the exact same S Corp mileage situation and was completely confused until reading through all these responses. One additional tip I learned from my CPA that might help others - if you're setting up an accountable plan mid-year, make sure to document when the plan goes into effect. You can't retroactively reimburse miles driven before the plan was established, but you can implement it for the remainder of the tax year. Also, for those tracking mileage, don't forget that trips between multiple business locations in the same day are all deductible. For example, if you go from your office to a client meeting, then to a business lunch, then back to the office - all those segments count as business miles, not just the initial trip from your office. The key takeaway I'm getting is that CPA #1's Schedule C advice would definitely cause problems since you can't be both an S Corp employee AND a sole proprietor for tax purposes in the same year. The accountable plan approach seems to be the universally correct solution here.

Reading through this thread has been incredibly enlightening! As someone who just elected S Corp status for my LLC this year, I was completely in the dark about how to handle business mileage properly. The consensus here seems crystal clear - set up an accountable plan and have the S Corp reimburse at the standard IRS rate, then deduct it as a business expense at the corporate level. This makes so much more sense than trying to figure out Schedule C complications. I'm curious though - for those who have implemented this system, how do you handle the timing of the reimbursements? Do you reimburse yourself monthly, quarterly, or just once at year-end when preparing taxes? I'm trying to figure out the best cash flow approach since my S Corp doesn't always have a ton of cash on hand. Also, does anyone know if there are any special considerations for vehicle insurance when you're getting reimbursed by your own S Corp for business use? I want to make sure I'm not creating any coverage gaps or issues with my auto insurance policy. Thanks to everyone who shared their experiences and advice - this thread should be required reading for anyone with an S Corp who drives for business!

This has been an incredibly thorough discussion! As someone who's been wrestling with the exact same S Corp mileage situation, I can't thank everyone enough for sharing their experiences and expertise. I want to emphasize one point that really stood out to me - the importance of proper documentation timing. Several people mentioned you can't retroactively establish an accountable plan for miles already driven, which is crucial information. I almost made that mistake myself! For anyone just starting to track business mileage, I'd recommend beginning with proper documentation right away rather than trying to reconstruct everything later. The IRS really does scrutinize vehicle expense deductions closely, so having contemporaneous records from day one gives you the strongest possible position. One thing I'm still curious about - has anyone dealt with situations where you use multiple vehicles for business? I have both a truck for equipment transport and a sedan for client meetings. I assume I'd need to track each vehicle separately and can reimburse for both, but wanted to confirm this doesn't create any complications with the accountable plan approach. The key message I'm taking away is that both CPAs in the original post gave incomplete advice. The Schedule C route would definitely cause problems, but the solution isn't that mileage can't be deducted at all - it just needs to be handled correctly through the S Corp structure via an accountable plan.

This thread has been absolutely invaluable! I'm dealing with the exact same S Corp mileage confusion and was getting nowhere with my own CPA who kept giving me vague answers. What really clicked for me reading through all these responses is that the accountable plan approach isn't just about avoiding Schedule C problems - it's actually the most tax-efficient way to handle business mileage in an S Corp structure. The reimbursement is a deductible business expense for the corporation AND it's not taxable income to me as the employee. That's a win-win I wasn't seeing before. I'm definitely going to implement the quarterly reimbursement system that several people mentioned. It seems like the sweet spot between maintaining good cash flow and keeping documentation organized. One follow-up question - when you submit your mileage reimbursement requests to your own S Corp, do you need to go through any formal approval process, or can you just cut yourself a check as long as the documentation supports it? I want to make sure I'm maintaining proper corporate formalities even though I'm the sole owner. Thanks to everyone who shared their audit experiences and practical tips. This thread should definitely be required reading for S Corp owners!

This entire thread has been incredibly helpful for understanding S Corp mileage deductions! I'm in a very similar situation - LLC elected as S Corp with W2 salary - and was getting the same conflicting advice from different tax professionals. What really stands out to me is how the accountable plan approach solves both the technical tax issues AND provides the best financial outcome. Getting a tax-free reimbursement while the S Corp gets the business deduction is clearly the way to go. I do have one practical question that I haven't seen addressed yet - what happens if you forget to track some business trips during the year? Is there any way to handle missed documentation, or are you just out of luck for those miles? I'm pretty good about tracking now, but I definitely missed some trips earlier in the year before I understood how important the documentation was. Also, for anyone still on the fence about setting up proper mileage tracking, I'd encourage you to just start now even if you're mid-year. Based on everything discussed here, having partial documentation is still better than no documentation, and you can at least capture the remaining months of business driving for this tax year. Thanks to everyone who shared their experiences and expertise - this has been more helpful than multiple CPA consultations I've had!

This thread has been absolutely fantastic! I'm another S Corp owner who was completely confused about mileage deductions until reading through all these detailed responses. One thing I want to add that might help others - make sure your S Corp actually has the cash flow to handle mileage reimbursements throughout the year. I learned this lesson when I accumulated about $3,000 in business mileage but my S Corp was running tight on cash. I ended up having to wait until a big client payment came in before I could reimburse myself, which made my quarterly tax planning more complicated. Now I factor potential mileage reimbursements into my S Corp cash flow projections at the beginning of each year. I estimate my annual business miles and set aside roughly that amount (at the IRS rate) so the money is always available when I need to process reimbursements. For anyone just starting this system, I'd recommend doing a quick estimate of your expected annual business mileage and making sure your S Corp maintains adequate cash reserves to cover those reimbursements. It makes the whole process much smoother and ensures you can take advantage of the deduction in the year you actually drove the miles rather than having to delay reimbursements due to cash flow issues. The accountable plan approach is definitely the right way to go - just wanted to share the cash flow planning aspect that I wish someone had mentioned to me earlier!

I've been following this discussion closely as someone who recently made the S Corp election for my LLC, and I want to thank everyone for the incredibly detailed explanations! One aspect I'd like to add that hasn't been mentioned yet - make sure you're aware of your state's rules regarding accountable plans and mileage reimbursements. While the federal tax treatment is clear (as everyone has explained perfectly), some states have different rules about whether these reimbursements are subject to state income tax or payroll taxes. In my state, I had to register the accountable plan with the Department of Revenue to ensure the reimbursements wouldn't be treated as additional W-2 wages subject to state withholding. It was a simple one-page form, but I'm glad I caught it before my first reimbursement. Also, for those asking about timing requirements - while the IRS doesn't specify exact deadlines for processing reimbursements under an accountable plan, they do expect "reasonable" timing. I've seen recommendations ranging from 30-120 days, but quarterly processing (as several people mentioned) seems to be well within acceptable bounds and makes business sense for cash flow management. This thread really should be bookmarked by anyone operating as an S Corp - the collective wisdom here is better than most professional consultations I've had on this topic!