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How to enter vehicle expenses on Schedule C

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Intuit

How to enter vehicle expenses on Schedule C

In ProConnect Tax, there are two screens that you can use to report vehicle expense on the Schedule C, line 9 while providing the required evidence for electronic filing. The screen you choose to use depends on whether you are claiming depreciation for the vehicle.

The following steps will guide you through entering mileage or actual expenses on a depreciated vehicle to be reported on a Schedule C, E, or F. For Schedule C filers, this information will also flow to the Schedule C, Part IV, or Form 4562, Part V, whichever is applicable.

Follow these steps to enter vehicle information:

  1. Go to the Input Return tab.
  2. On the left-side navigation menu, click Deductions.
  3. Select Depreciation.
  4. Enter any applicable information in the Quick Entry grid. The following entries are mandatory:
    • Form
    • Date placed in service
    • Cost or basis
    • Method
  5. Click the Details button.
  6. On the left-side navigation menu, click Automobiles and Other Listed Property.
  7. Check any boxes that apply.
  8. Scroll down to the Automobile Mileage section.
  9. Enter the Total mileage and Business mileage (mandatory to calculate business use percentage).
  10. Scroll down to the Actual Vehicle Expenses section and enter any actual expenses that apply.

By default, ProConnect Tax generates a Vehicle Expense Worksheet that calculates the standard mileage deduction and the actual expense deduction. The program will automatically choose the method which produces the largest deduction. Make an entry in 1=force actual expenses, 2=force standard mileage rate to override the automatic optimization.

The following steps will guide you through entering vehicle information to calculate the actual expense or standard mileage rate to be reported on a Schedule C, E, F, or Form 2106. For Schedule C filers, this information will also flow to the Schedule C, Part IV, or Form 4562, Part V, whichever is applicable.

Follow these steps to enter vehicle information:

  1. Go to the Input Return tab.
  2. On the left-side menu, click Deductions to expand that section.
  3. Select Vehicle/ Employee Bus. Expense (2106).
  4. Select the form you want to link this vehicle to in Form (Click on arrow to select from list).
  5. Scroll down to the Vehicle Information section and fill out the applicable information for the vehicle.
  6. In the Vehicle Expenses section, enter the Date placed in service, Total mileage, and Business mileage.
  7. Scroll down to the Actual Expenses subsection and enter any applicable amounts.
    • If actual expenses are entered, the program will automatically figure the greater deduction between mileage or actual expenses.  You can force either deduction in the field 1=Force Actual Expenses, 2=Force Standard Mileage Rate.

Additional information:

  • Two vehicles can be entered on each tab.  If more entries are required, click the  at the top of your screen to add a new tab.
  • If you link more than two vehicles to the same Schedule C, the listed property information carries to Form 4562, page 2.
  • Handicapped employee expenses carry to Schedule A in full if you enter 2 in:  1 If Qualified Performing Artist, 2 If Handicapped Employee, 3 If Fee-Basis Govt. Official.
  • Fee-Basis government official expenses carry directly to Form 1040 if you enter 3 in: 1 If Qualified Performing Artist, 2 If Handicapped Employee, 3 If Fee-Basis Govt. Official.
  • Excess reimbursements for expenses other than meals and entertainment carry to Form 1040 as additional wage income.

On the Business Income (Schedule C) screen, there's an input field for Car and Truck Expenses [Adjustment]. An entry here will flow to line 9 of the Schedule C, but this field may only be used when paper filing a return. When e-filing, the IRS requires evidence to support the deduction. Evidence must appear on either the Schedule C, Part IV, or Form 4562, Part V.

The following critical diagnostic will generate:

"Schedule C: Auto and truck expenses require evidence to support the deduction. Failure to provide this support on Schedule C Part IV or Form 4562 Part V will cause the e-file return to be rejected by the IRS. If the vehicle in question is a heavy truck, mark the listed property checkbox or choose method 43 or 44 in the depreciation input to satisfy the IRS e-file specifications for Reject 183." Ref #584

This diagnostic may be solved by:

  1. Go to Income > Business Income (Sch C)
  2. Scroll down to the Expenses section
  3. Remove the amount in Car and truck expenses [A]
  4. Report the vehicle information as indicated above.
  1. Go to Deductions > Depreciation
  2. Select the appropriate Method from the drop-down menu for the asset.
ProConnect Tax Online will not populate Schedule C, Part IV, if Form 4562 is generating with the return.

  • Per the Schedule C, Part IV instructions: "Complete this part only if you are claiming car or truck expenses and are not required to file Form 4562 for this business."

If the Form 4562 is generating for any reason, the vehicle information will appear on page 2 of Form 4562.

Reasons Form 4562 will generate:
  • Assets placed in service for the current tax year
  • Section 179 expense deduction is being taken (which may include a carryover from a prior year)
  • Depreciation on listed property (regardless of when the property was placed in service)
If vehicle information is entered on the Depreciation input screen, ProConnect Tax Online assumes that depreciation may be taken on this vehicle.  In this case, the vehicle information will flow to Form 4562, Page 2, Part V.  In order to have vehicle information flow to Schedule C, Part IV, the information must be entered on the Vehicle/Employee Business Expense input screen instead.
  1. Click on the Check Return tab.
  2. On the left-hand side, below Critical Diagnostics, click on Suggestions.
  3. Review the list, checking for those that call out any missing information.

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