Tax Law (Questions About Taxes)/Partnership Mileage Expense, Reimbursement & Deduction
I have a partnership and involves frequent travel and use of personal vehicle for the business that are often paid by the partner traveling. What would be the best and simple way to reimburse the partner so that there is minimal of accounting and headaches later down the road. Should the partners take out the mileage * IRS standard rate for that year expended from the partner account and paid to the partner. Would this be fair and correct under IRS guidelines for reimbursement?
What we have tried in the past is expense the partnership account and reimburse the partner with a fixed cost for gas say $X, irrespective of the miles traveled. This seems to be hanky-panky accounting.
The simple method for the partnership would be to require the partner to file a monthly report listing the exact miles traveled on each trip for the business. At the end of the month pay the partner a mileage rate up to the rate allowed by the IRS. Remember the IRS will not allow anyone to collect payments on miles to work and from work to home. Therefore the rule you establish for record keeping must include a rule that overcomes this situation from occurring. For instance if the first visit of the day begins with a trip to a client that begins from home an ends at the clients place a deduction from the miles for the distance from home to work then pay for the difference. The important part is detailed records must be kept on all vehicles used in business. The miles traveled for business and miles traveled for personal use must be accounted for and must equal the total miles driven for the year.
Hopefully I have not confused you. The IRS has requirements that must be met when accounting for business use of personal vehicle in business.