I am trying to understand what is the simplest way for an S-Corporation to do the accounting for a vehicle that is used by an employee who is a 2%+ shareholder of the corporation.
Assume the vehicle has a fair market value of $4500. Under the IRS Annual Lease Value (ALV) table in 2011 Pub 15-B, the vehicle has an annual lease of $1600, so assuming 20% personal use the employee has $320 of personal use value.
The IRS guideline seems to be that $320 would need to be reported as a fringe benefit to the employee?
The questions are:
1) Is the benefit supposed to be reported on the W-2 as a fringe benefit, or is the benefit supposed to be treated as a distribution from AAA of the S-Corporation because of the 2%+ share ownership? Or is it even more complicated?
2) Is there any way to just simplify this and have the employee write a personal check to the corporation for $320, thus avoiding the need to report any fringe benefit on the W-2? Would that payment simply become a reversal of the distribution from the S-Corporation to the shareholder? Or is that $320 treated by the S-Corporation as a reversal of an expense?
$320 of value is an absolutely minimal amount of value. The accounting fees to:
- calculate the business use of vehicle
- do the payroll accounting
- process the S-Corporate return
- process the shareholder K-1
- process the shareholder W-2
just for this one issue, probably exceed $320. So is there a way to just greatly simplify all of this to minimize the amount of paper chasing?