@Bryan46 wrote:
In this scenario, if the car is under me and later S corp reimburse me for the mileage. How do I claim this reimbursement on the business return? As an operation expense?
If you are a sole proprietor, you are a disregarded entity. You file a schedule C attached to your regular (personal) tax return. The schedule C lists your business income and expenses. The net income flows to your regular 1040 where it is combined with any other income, such as from a spouse, or a W-2 job, or investments, and so on. Then your personal deductions are applied (mortgage, charity, etc.) and any credits (for dependents, purchase of an EV or energy efficient home improvements, and so on). You pay income tax on your net taxable income, and you pay self-employment tax on the income from your schedule C business.
If you use your own car for business, then your car expenses are one of your expenses on schedule C that are subtracted from your gross income. You would determine your car expenses using either the standard mileage method or the actual expense method. I don't know what other expenses you would have as a rideshare driver, but you would deduct them as well. (If you get a cell phone for ride share only, you can deduct the cost of the phone and the bill. If you use your personal phone, you may be able to deduct a portion of the cost if you have a reasonable method of allocating the total cost between personal and business use. You can't deduct your own meals on the road, but if you provide snacks for passengers, I believe you can deduct 50% of the cost. You can also deduct Kleenex, hand sanitizer and other amenities, provided you have records to show they are business expenses.)
If you did this as an S-corp, you keep the same mileage and car expense records. The S-corp can reimburse you under an accountable plan and then the S-corp deducts the reimbursement as a business expense on its form 1120 business tax return. The S-corp can pay directly for snacks and amenities, and can deduct the cost of amenities and (I think 50% of the cost of the snacks) as business expenses on its business return.
In simpler terms, if you are self-employed, you can deduct the exact same expenses as an S-corp is allowed to deduct. The only advantage to being an S-corp is that you pay less employment tax, if you have profits that are more than the salary you must pay yourself as fair compensation for the work you perform. But that "fair compensation" question is the #1 audit target for single owner S-corps, so be careful. There may be other drawbacks as well, and I would recommend professional advice.
