Mileage As a Deduction (Guest Blogger: Arlene Perry )

Hello to all my entrepreneurs who are happily making that time-consuming commitment to creating a business for themselves and a legacy for their loved ones.

You’re busy running around, from client to client or location or location while running up all those miles on your vehicle. Well I have some good news for you. Those miles can be tax deductible. And in turn, will help decrease your taxable income. Because who in their right mind wouldn’t want to have less income to report to our best friend, Uncle Sam?

Business owners, including the self-employed, are allowed to deduct the mileage used for business. To do so, they have to use either the current IRS rate of 54 cents per mile or the business portion of their actual auto expenses. Expenses like gas, car payments and insurance. Whatever method they decide to use, they must have good, accurate, written records maintained and produced if ever the IRS should audit them.

The IRS does consider mileage deduction an easy target for auditing because there are strict restrictions on the type of mileage that qualifies as a deduction.

Individuals may also deduct their mileage if they are an employee who uses his or her car for business. Keep in mind though that the mileage Can’t Include Commuting To And From Work And Can’t Be Reimbursed By Your Employer. Here’s what Mileage can be deducted:

 Travel between 2 different work locations
 Travel to temporary work location (less than 1 year) from your home
 Travel for business related work errands, (ex. Banking, Purchasing Supplies, Setting up work events)
 Travel for clients’ meetings, both self-employed and employees
 Travel for business meetings or clients’ entertainment
 Travel to airports if related to clients

*****SELF-EMPLOYED PERSONS WILL CLAIM THEIR MILEAGE AS AN EXPENSE ON SCHEDULE C RATHER THAN ITEMIZING ON SCHEDULE A LIKE EMPLOYEES WILL DO****

In addition to the above rules, there are a few other things that can be beneficial to the tax payer. Here they are:

 People who are unemployed and traveling looking for work may deduct mileage to find a new job in their current occupation. BUT NOT traveling seeking employment in a new industry. They can deduct expenses paid traveling by public transportation.

 Those working full-time 39 weeks in the last 12-month period and have relocated at least 50 miles for work are entitled to claim a smaller deduction of 23 cents a mile

 For those working from home, usually the self-employed, there is no commuting mileage. So you claim all mileage traveling to business locations such as a second office or the clients’ locations.

As stated earlier in this post, it’s vital for individuals to keep accurate records when deciding to claim mileage. Audits by the IRS are unpredictable and have absolutely nothing to do with tax preparers.

Taxpayers are responsible for the upkeep of their own records. Which is why I also highly recommend they meet with a Bookkeeping or Accounting professional at least once a year. Twice for optimum benefits.

Additionally, I suggest investing in a travel log that can be obtained from any stationary store. And if individuals are technologically savvy, there are plenty of Apps available like QuickBooks Self-Employed. These will allow them to keep the records needed for the IRS if need be . They will need to show the number of miles for each trip, the date and time for each trip, the location they went to and the purpose of the trip which would include a client’s name if appropriate.

Mileage is a deduction/expense the tax payer is entitled to, but many bypass it because of the work involved. I say take every deduction you can and put in the effort because it can be worth it.

FOR ADDITIONAL INFORMATION ON THIS SUBJECT, REVIEW IRS PUBLICATION 463 at https://www.irs.gov/pub/irs-pdf/p463.pdf

521579_281360388613887_1386852851_n

Arlene Perry, Bookkeeper, MBA
Arlene@ArlenesUnlimitedServices.Com

Arlene Perry, MBA is the owner of Arlene’s Unlimited Services; a full service tax preparation, bookkeeping and payroll business. Having had the business since 1998,  she serves the Manhattan and Bronx areas of New York City.

Within this time, Ms. Perry has worked with a variety of small businesses in different industries. They include security and retail as well as the bookkeeping of non-profit organizations.

Arlene graduated with a Bachelor’s degree in Accounting and a Masters degree in Business from Monroe College in New Rochelle, New York.

Prior to returning to college, Ms. Perry worked for the City of New York as a Police Officer. While serving, she prepared the tax returns for many of her co-workers and kept the financial records of a non-profit youth group that she was a part of.

Presently, Ms. Perry is working for a great non-profit organization focusing on keeping our youth out of the prison system. She’s also creating a side Baking Business. She’s a proud member of Real Sisters Rising, M & M Projects and Administrator of a Bookkeepers and Food Groups on FaceBook.

For more on TaxAssurances, check out our reviews, photos and links on Yelp.

Also, here is a link to our Signup Form to subscribe to our list.

Advertisements

Just Left a Face to Face IRS Audit

downloadToday I met with a friend and the IRS for a face to face audit of his 2011 personal and business taxes. The audit was at the IRS offices located at 290 Broadway in NYC. The meeting started at 11 am and ended at 1:30 pm. Again, he runs a business and they wanted an explanation of his business and his business expenses.

Here are the important takeaways from the audit:

* Don’t Panic

IRS employees are people too. Ours was pleasant and professional. She lives in Brooklyn, sends her son to a charter school and loves to garden. She even shared her skittles.

Her office neighbor’s ringtone of Lil Jon and Usher was pure comedy.https://www.youtube.com/watch?v=GxBSyx85Kp8

* KEEP ALL YOUR RECEIPTS/INVOICES/CANCELLED CHECKS

That is the most important take away. The more receipts/invoices/cancelled checks you have, the less you need to worry about an audit (They don’t want bank statements).

This also goes for people who itemized deductions on Schedule A for charities and medical expenses.

* Be Organized

The more organized you are, the faster everything goes and the easier the process. Software is helpful in explaining expenses but receipts are what they really want. Scanners and folders are worth the investment.

* Be able to explain your business in detail

The IRS wants to make sure the expenses you claim make sense for the business.

* Respond to an audit as soon as possible

Again, having the receipts makes the process so much easier.

For more on TaxAssurances, check out our reviews, photos and links on Yelp.

Can I Write off My Work Clothes on My Taxes?

EarthWindFire_Legacy

Every so often, I get a variation of the same question from friends and clients, “can I deduct the cost of my clothes on my taxes?” The answer depends. If you are part of Earth, Wind & Fire or Twisted Sister, sure. If not, probably not.

In all seriousness, the IRS allows individuals to write off the purchase and care of their clothing if it is unique, special and required for the job. For instance, nurses, police officers and other professionals who have to wear a uniform for work, can write off the purchase and upkeep of their clothing.

If someone is a professional that wears a suit every day and needs it to keep up appearance like a news anchor, then they cannot write off the purchase and upkeep of their clothing. If they do write it off and the IRS does an audit, the write off will be reversed and the taxpayer will end up owing the IRS the money for the deduction.

For more information, here is what the IRS says about writing off work clothes:

Work Clothes and Uniforms

You can deduct the cost and upkeep of work clothes if the following two requirements are met.

• You must wear them as a condition of your employment.
• The clothes are not suitable for everyday wear.

It is not enough that you wear distinctive clothing. The clothing must be specifically required by your employer. Nor is it enough that you do not, in fact, wear your work clothes away from work. The clothing must not be suitable for taking the place of your regular clothing.

Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc.).

Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear.

However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible.

Protective clothing. You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves.

Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers.

Military uniforms. You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses.

If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive.

You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school.

 

For more on TaxAssurances, check out our reviews, photos and links on Yelp.

Average Tax Prep Fee Inches Up to $273 (REPOST FROM ACCOUNTING TODAY)

REPOST FROM ACCOUNTING TODAY:
WASHINGTON, D.C. (JANUARY 14, 2015)

The average fee for preparing a tax return, including an itemized Form 1040 with Schedule A and a state tax return, will increase a few dollars to $273 this year, a 4.6 percent increase over the average fee of $261 last year, according to a survey by the National Society of Accountants.

The figure also represents an 11 percent increase from two years ago when the survey was conducted.

The average cost to prepare a Form 1040 and state return this season without itemized deductions is expected to be $159, also a 4.6 percent increase over the average fee last year, which was $152. It is an 11.2 percent increase from two years ago.

“When you consider that it takes the average taxpayer five hours to complete a tax return, this is a very strong value,” said NSA executive vice president John Ams in a statement. “The tax code continues to become more complex each year, including some new Affordable Care Act reporting requirements. Professional tax preparers may also be able to find tax deductions and credits that may taxpayers might not notice.”

The NSA collected the fee information during a survey of preparers. The tax and accounting firms surveyed are owners, principals, and partners of local “Main Street” tax and accounting practices who have an average of more than 27 years of experience.

NSA member tax preparers typically hold multiple credentials that demonstrate their expertise, including Enrolled Agent, CPA, Accredited Tax Preparer, Accredited Tax Advisor, and others.

The survey also reported the average fees for preparing additional Internal Revenue Service (IRS) tax forms, including $174 for a Form 1040 Schedule C (business), $634 for a Form 1065 (partnership), $817 for a Form 1120 (corporation), $778 for a Form 1120S (S corporation), $457 for a Form 1041 (fiduciary), $688 for a Form 990 (tax exempt), $68 for a Form 940 (Federal unemployment), $115 for Schedule D (gains and losses), $126 for Schedule E (rental) and $158 for Schedule F (farm).

The NSA noted that the fees vary by region, firm size, population, and economic strength of an area.

The average tax preparation fee for an itemized Form 1040 with Schedule A and a state tax return in each U.S. census district are:

•    New England (CT, ME, MA, NH, RI, VT) – $246
•    Middle Atlantic (NJ, NY, PA) – $314
•    South Atlantic (DE, DC, FL, GA, MD, NC, SC, VA, WV) – $268
•    East South Central (AL, KY, MS, TN) – $262
•    West South Central (AR, LA, OK, TX) – $205
•    East North Central (IL, IN, MI, OH, WI) – $240
•    West North Central (IA, KS, MN, MO, NE, ND, SD) – $198
•    Mountain (AZ, CO, ID, MT, NV, NM, UT, WY) – $256
•    Pacific (AK, CA, HI, OR, WA) – $348

Most accounting firms offer prospective clients a free consultation, the NSA pointed out, which can be worth well over $100 based on the hourly fees of most tax preparers.

All the fees cited assume a taxpayer has gathered and organized all the necessary information.

Taxpayers should also make sure they provide information on time to avoid additional fees, the NSA noted. Many tax preparers will charge an average fee of $114 for dealing with disorganized or incomplete files.

Some will charge an average fee of $42 to file an extension, an average fee of $88 to expedite a return, and an average fee of $93 if information is not provided in advance of an agreed-upon deadline. For taxpayers who are audited by the IRS, the average hourly fee to handle the audit is $144.

For more on TaxAssurances, check out our reviews, photos and links on Yelp.

Alleviate Audit Anxiety

IRS4Internal Revenue Service tax audits can be complicated and time-consuming, but the right tax preparation can make them less stressful. Taxpayers facing an audit should remember these five things:

1. Seek Professional Help

Upon receiving an IRS audit notification, taxpayers should meet with their tax professional to discuss what the audit notification means, what is being requested and what records are needed.
2. Seek Representation

Correspondence audits are handled via mail, field audits have auditors visit a home or business in question, and office audits require taxpayers to report to an IRS office. Depending on the type of audit and individual situation, taxpayers may represent themselves or seek assistance from a certified public accountant, lawyer or enrolled agent. Enrolled agents are federally authorized tax practitioners empowered to represent taxpayers before the IRS.

3. Organize

Ideally, taxpayers should keep complete, organized financial records for the past seven years. Gather all receipts, checks and other records relevant to the audit. Be thorough; having the records the IRS requests readily available will help the audit go more smoothly.

4. Be Concise

Taxpayers should only give the auditor copies of documents the IRS specifically requests and answer all questions honestly. Do not volunteer information that is not requested.

5. Appeal

If taxpayers disagree with auditors’ findings, they can file an appeal with the IRS. Appeal options include meeting with the auditor’s supervisor, or filing an administrative appeal to the U.S. Tax Court, U.S. Claims Court or the local U.S. District Court.
Of course, the best audit is the one that doesn’t happen. To lessen the likelihood of being audited, taxpayers should report all income and only claim credits and deductions they are entitled.

For more on TaxAssurances, check out our reviews, photos and links on Yelp.