Apparently some tax practitioners do not know that a corporation is not allowed the use of the standard mileage method to deduct the costs of corporate owned vehicles.

We just encountered our third S corporation in the past 6 months where the prior preparer had been including the vehicle expenses as being the amount of miles x standard mileage rate.

If the corp owns the vehicle, actual costs must be used.

If the employee/shareholder owns the vehicle, and gets reimbursed by the corp based on a submitted bill which uses the mileage method..........that is ok--------but the corp has to issue payment, and the ee/shareholder must have the documentation required by Section 274(d).  The tax preparer cannot just stick the number into the corp return, based on an "estimated number of miles" by the ee.

I am guessing that a big culprit of doing this is the practitioner who is not filling out the balance sheet portion of an S corp return...........that has been our experiences todate.  By not having to make things balance, there is no control over a lot of things, including making the tax deductions tie to corp records.

Just an oops to watch for----------violation will kill the entire deductions for the vehicles. 

Cites for the above------- the annual Revenue Procedure establishing the mileage rates--------example is Rev Proc 2004-64.  Refer to the definitions section, and note that the corp is excluded from the allowable users.

Section 3 establishes the authority of the Rev Proc, ie pulls together the various rules, etc. which give the definitional section teeth.