What Is The Best Way To Treat Auto Expenses For Practice Partners?

Richard Jablonski, OD writes:

We just incorporated in 2007, and would like to defer or transfer some car expenses for co-owners of my practice.

One current vehicle has about 3 years to pay off, and I am going to purchase another used car, but new to me.

What is the best way to do this? How can I equalize car expense allowance for the two partners? Should I buy the used car in the name of the office? I am not sure what the best way to proceed is.

Jerry Hayes, OD responds:

We know times are tough when readers start asking me for tax advice!

For this question, I turned to my former CPA, Ken Hicks of May & Company, LLP in Vicksburg, MS. Ken works with over 100 ODs in 29 states and probably has the largest OD tax and accounting practice in the country. Here's what he had to say:

We learned the following technique for handling auto expenses in a multi-partner arrangement from a large tax law practice. It works like this:

Our firm will reimburse partners for up to $1,500 per month for any business expense including business auto mileage (2008 = $.585 and 2009 = $.55) as long as the partner turns in a monthly expense report and meets IRS requirements (date, place, business purpose, and documentation).

Most partners will always find $1,500 in legit business expenses to be reimbursed. Any business expenses in excess of $1,500 are not reimbursed by the firm but are still deductible on the individual's personal tax return.

This has proven to be a fair way in a multi-partner firm to control firm expenses and get proper reimbursement to the partners.

Disclaimer: The information and opinions contained on this site are for discussion purposes only and are NOT intended to serve as legal, accounting or investment advice. ©2008 Jerry Hayes, OD. Not to be reproduced without written permission of the author.