Mileage Deductions

[Pilgrim]

Originally Posted by Fkatz
Hi All,

Again there seems to be confict in which Deduction is Correct for your type of Truck, Here is the actual breakdown of what can take the Standard Mileage Deduction!!!!

All vehicles Over the Road UP TO 10,000 LBS. can use the Standard Mileage Rate.
this includes all miles traveled except for personal use. Average 15% DEDUCTION UNLES YOU KEEP EXACT MILEAGE USE FOR PERSONAL.

I'm going through an audit right now - is there a specific section of the tax code we can use to substantiate this 15%? Also, in an earlier post there was a question regarding the deduction of interest on financing the vehicle - can this be deducted in addition to the standard mileage rate? I've always had the understanding that finance charges/interest was NOT allowed if the standard mileage method is used.

 

[OntarioVanMan]

I'm going through an audit right now - is there a specific section of the tax code we can use to substantiate this 15%? Also, in an earlier post there was a question regarding the deduction of interest on financing the vehicle - can this be deducted in addition to the standard mileage rate? I've always had the understanding that finance charges/interest was NOT allowed if the standard mileage method is used.

That 15% is not cast in stone or in this case, code...but a general accepted deduction amount without needing exact verification...as he said..."UNLESS YOU KEEP EXACT MILEAGE USE FOR PERSONAL."

I have used the 15% on our tax returns...and that is an estimation only. If you take more then that then red flags will fly

 

[RLENT]

That 15% is not cast in stone or in this case, code ... but a general accepted deduction amount without needing exact verification...as he said..."UNLESS YOU KEEP EXACT MILEAGE USE FOR PERSONAL."

I'm not entirely sure because I haven't had a chance to fully research it between loads, but the 15% may merely be a "trigger amount" .... IOW, anything over 15% will have more of a chance of triggering an audit, whereas anything 15% or less won't (or is less likely)

In any event, one needs to keep in that mind what triggers an audit and what it may be legal to deduct may well be two entirely different things ....

The following is relevant:

From Publication 535, Business Expenses (<----click for link):

"Business use of your car. If you use your car exclusively in your business, you can deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage."

Please note the use of the word "must" above.

Further from Publication 535:

"You can deduct actual car expenses, which include depreciation (or lease payments), gas and oil, tires, repairs, tune-ups, insurance, and registration fees. Or, instead of figuring the business part of these actual expenses, you may be able to use the standard mileage rate to figure your deduction."

But even so, you still must divide the actual usage between business and personal as outlined in Pub 535 - whether you use the actual expenses or the standard mileage rate.

From Publication 463, Travel, Entertainment, Gift, and Car Expenses, under the section entitled How To Prove Expenses on page 25:

"You cannot deduct amounts that you approximate or estimate"

Also from the same section of Publication 535 as quoted above:

"If you are self-employed, you can also deduct the business part of interest on your car loan, state and local personal property tax on the car, parking fees, and tolls, whether or not you claim the standard mileage rate.""

I have used the 15% on our tax returns...and that is an estimation only. If you take more then that then red flags will fly

Red flags have already flown - he's in the middle of a freakin' audit

Publication 463 and 535 are quite clear - you can't estimate it - you must keep track of the actual business and personal usage and take only the part (business use) which you are entitled to as a deduction.

You may be again to get away using 15% when filing a return ..... but if you get audited it's an entirely different kettle of fish .....

 

[Fkatz]

Hi all,

It seems that there is a problem with the approximate 15% personal use of a cargo van if you do not keep accurate records for that personal use,

That use is considered for shopping for food stock up, clothes, movies, or any entertainment that you chose to do on the road,

The actual law states that you really cannot use the standard mileage rate due to the fact that you are considered '' FOR HIRE" ACCORDING TO THE IRS and must use the actual expenses that you incur while on the road.

If you are in a Sprinter, or any other GVW vehicle it must be under 10,000 GVW in order to that the standard Rate. in the Ohio Valley area (Cincinnati and Chicago IRS office were disallowing the standard mileage rate use in our businesses due to the "FOR HIRE" DESIGNATION. If your lease contract states that the company has exclusive use
phrased out , then you are not "FOR HIRE" to anyone else for loads.

Your company weather it be, FEDEX, Panther, CTX, Tri-state, Express 1, Try Hours, etc, the loads that they give to you are theirs, They own the load until it delivered. and they are billing the shipper for the load.
even though you are an independent contractor leased to them.

There is a Chief Council Memo, that was never updated that was issued in 1997 in reference to the standard mileage rate and its use, it was CCM 1997-40, I do have a Copy if you need it. If they are deciding to disallow the standard rate. and I do not know if they would honor now 12 years later. You would need a full copy of that memo, to take with you to the audit.

If you have any questions please do not hesitate to ask!

Franklin Katz, ATP ,PA, PB
Frank’s Tax and Business Service
120 York Rd
Kings Mountain, NC 28086-3151
(704) 739-4039
Fax: (704) 739-3934


Providing Professional Accounting Services and Income Tax Preparation

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