Richard A. Lindsey, CPA

Lindsey & Waldo, LLC – Certified Public Accountants

  • Dec 22

    Auto expenses are an important deduction for business owners and employees who must travel. If you use your personal vehicle for travel, in-town or out-of-town, it is very important that you audit proof your auto deduction or risk losing the deduction in its entirety. The last thing you want to do is sit across the table from some burly, growling IRS auditor, with all the sympathy of a moon rock and the understanding of a doorstop, without any records to back up your deduction.

    Can you say bye-bye deduction and hello penalties?

    Auto expenses may be deducted using either the actual cost method or the mileage method. Documentation is the key and the required documentation is different with each method.

    Under the actual cost method, all expenses for purchasing, owning, and operating the vehicle must be documented. Receipts for fuel, oil, repairs, maintenance, insurance, etc. must be kept. In addition, if the business use of the vehicle isn’t 100% then you may also need to keep the mileage log information discussed next.

    You can audit proof your mileage method deduction by keeping a few simple records. A mileage log, diary, expense reports, trip sheets, cancelled checks, receipts, repair bills, and any other relevant information and documents are all that you need.

    What exactly does the IRS want to see?

    • How many total miles did you put on your automobile last year?
    • How many of the total miles on your automobile were for business and how many were personal? (This will show the business percentage.)
    • How many miles were driven for each trip, from business destination to destination? (IRS wants real numbers, not just a guess.)
    • What was the business reason for going to this destination? (Examples: Business meeting with Tom Smith of ABC Corp. or XYZ Store for office supplies.)
    • What other business expenses were involved in this travel? (Examples: Tolls, parking…etc.)

    Caution: There is a general rule which enables taxpayers to estimate business expenses when evidence indicates such expenses were incurred but an exact amount cannot be determined. However, such estimates cannot be used when claiming deductions related to automobiles. You must meet the substantiation requirements, or the deduction will be disallowed.

    If you use a day planner for your appointments, just write the mileage down on it. Or, if you use a wall calendar for your appointments, use that. Or, if you prefer spreadsheets, use that. Or use an app for that. The best method to use is the one that you will use. The IRS requires that you keep these records “contemporaneously”- meaning shortly after the event occurred. It is easier to keep up with it daily and is more acceptable in an audit.  Once you get in the habit it won’t seem so onerous.

  • Jan 9

    The 2015 optional standard mileage rates used to calculate the deductible cost of operating an automobile for business, charitable, medical or moving purposes has been released by the Internal Revenue Service.

    Beginning on January 1, 2015, the standard mileage rates for the use of a car, van, pickup or panel truck will be:

    • 57.5 cents per mile for business miles driven, up from 56 cents in 2014,
    • 23 cents per mile driven for medical or moving purposes, down half a cent from 2014
    • 14 cents per mile driven in service of charitable organizations.

    The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile, including depreciation, insurance, repairs, tires, maintenance, gas and oil. The rate for medical and moving purposes is based on the variable costs, such as gas and oil. The charitable rate is set by law.

    Taxpayers always have the option of claiming deductions based on the actual costs of using a vehicle rather than the standard mileage rates.

  • Feb 8

    The Internal Revenue Service has announced that the optional standard mileage rates for use of a vehicle for business or medical purposes rose 1 cent, effective January 1, 2013.

    The standard mileage rates for use of car, van, pickup or panel van are now:

    • 56.5 cents per mile for business,
    • 24 cents per mile for medical or moving purposes, and
    • 14 cents per mile in service of a charitable organization.

    The rate for service to a charitable organization remains unchanged.

    The standard mileage rate for business is based on an annual study of the fixed and variable costs or operating an automobile. The medical and moving rate is based on the variable costs.

    A taxpayer always has the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

  • Dec 16

    Auto expenses are an important deduction for business owners and employees who must travel.  If you use your personal vehicle for travel in-town or out-of-town, it is very important that you audit proof your auto deduction or risk losing the deduction in its entirety. The last thing you want to do is sit across the table from some burly tax auditor without any records to back up your deduction.

    Can you say bye-bye deduction and hello penalties?

    You can audit proof your deduction by keeping a few simple records. A mileage log, diary, cancelled checks, receipts, repair bills and any other relevant information and documents are all that you need.

    What exactly does the IRS want to see?

    • How many total miles did you put on your automobile last year?
    • How many of the total miles on your automobile were for business and how many were personal? (This will show the business percentage.)
    • How many miles were driven for each trip, from business destination to destination? (IRS wants real numbers, not just a guess.)
    • What was the business reason for going to this destination? (Examples: Business meeting with Tom Smith of ABC Corp. or XYZ Store for office supplies.)
    • What other business expenses were involved in this travel? (Examples: Tolls, parking…etc.)

    If you use a day planner for your appointments, just write the mileage down on it.  If a wall calendar is used for your appointments, that will work too, just make sure to add up the mileage.  The IRS requires that you keep these records “contemporaneously” meaning shortly after the event occurred. It is easier to keep up with it daily and is more acceptable in an audit.  Once you get in the habit it won’t seem so onerous.

  • Aug 5

    The Internal Revenue Service recently announced an increase in the optional standard mileage rates for the second half of 2011. You may use the optional mileage rates to calculate the deductible costs of operating a vehicle for business or other purposes. 

    The rate will increase to 55.5 cents a mile for all business miles driven from July 1, 2011, through December 31, 2011. This is an increase of 4.5 cents from the 51 cents in effect for the first six months of 2011.

    In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2011. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

    “This year’s increased gas prices are having a major impact on individual Americans. The IRS is adjusting the standard mileage rates to better reflect the recent increase in gas prices,” said IRS Commissioner Doug Shulman. “We are taking this step so the reimbursement rate will be fair to taxpayers.”

    While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

    The optional business standard mileage rate is used to compute the deductible costs of operating an automobile or light truck for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

    The new six month rate for computing deductible medical or moving expenses will also increase by 4.5 cents to 23.5 cents per mile, up from 19 cents for the first half of 2011. 

     

    Mileage Rate Changes  
    Purpose Rates 1/1 through 6/30/11 Rates 7/1 through 12/31/11
    Business 51 55.5
    Medical/Moving 19 23.5
    Charitable 14 14

     

    You always have the option of calculating the actual costs of operating your vehicle rather than using the standard mileage rates.