• Any amount the law excludes from pay.

• Any amount the recipient paid for the benefit."

There isn't a carve out for any % shareholder here; not 2%, not 5%, not 10%.

And: https://www.irsvideos.gov/Business/FilingPayingTaxes/EmployerProvidedVehicles

"When your employees use an employer-owned vehicle for personal use - that is a taxable fringe benefit and you must report the value of that use on their W-2.

Personal use of a vehicle means nonwork-related purposes such as: the commute between home and work, using it on the weekend or for a vacation, or someone other than your employee using it like a family member, friend, or neighbor."

I'll give you an example: Where I worked, we had 3 company owned trucks: 3/4 and 1 ton. They got used for hunting every fall, and those employees were taxed on the value for their trips. Whenever one of the trucks also was used by one of the shareholder-employees to haul a horse trailer to the spouse's races, that also is taxable personal benefit.

"and takes expenses for ONLY 80% (business use)."

Your employee doesn't get that for free; just ignoring it on the corporation's tax return does not make the ignored portion free to that person.

As I pointed out, it can be reported two ways:

100% vehicle expense

or

100% vehicle expense, reduced by 20% as "compensation" under Taxable fringe, which "moves" that 20% (the taxable value that you determine per the tables that apply) to Compensation expense.

That second formula seems to be what you want to do. A combination of them seems to be what you are doing, which doesn't comply with the IRS. No matter what, you have a condition of 100% corporate ownership and operating expense. Otherwise, these people should stop doing this and use Personal vehicles and turn in mileage reports.

It's easy to do it right.