One of the biggest tax deduction for most business owners
s there mileage. Yet so many people fail to keep accurate millage
records
This is a shame
Because beginning on Jan. 1, 2009, the standard mileage rates for
the use of a car (also vans, pickups or panel trucks)
was
- 55 cents per mile for business miles driven
- 24 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
Theses rates for business, medical and moving purposes
are slightly lower than rates for the second half of 2008
that were raised by a special adjustment mid-year in response
to a spike in gasoline prices. The rate for charitable purposes
is set by law and is unchanged from 2008.
The business mileage rate was 50.5 cents in the first half of 2008
and 58.5 cents in the second half. The medical and moving rate
was 19 cents in the first half and 27 cents in the second half.
The mileage rates for 2009 reflect generally higher transportation
costs compared to a year ago, but the rates also factor in the
recent reversal of rising gasoline prices. While gasoline is a significant
factor in the mileage rate, other fixed and variable costs, such as
depreciation, enter the calculation.
The standard mileage rate for business is based on an annual study
of the fixed and variable costs of operating an automobile. The
rate for medical and moving purposes is based on the variable costs
as determined by the same study. Independent contractor Runzheimer
International conducted the study.
A taxpayer may not use the business standard mileage rate for a vehicle
after using any depreciation method under the Modified Accelerated Cost
Recovery System (MACRS) or after claiming a Section 179 deduction for
that vehicle. In addition, the business standard mileage rate cannot be
used for any vehicle used for hire or for more than four vehicles used
simultaneously.
As you can see this could easily become a huge deduction. Think of
it this way every two miles that you drive for business purposes
can earn you $1.10 tax free money
So what to do if you have not been keeping records…
Well it is perfectly legit to reconstruct your milage
here are the instructions for mileage reconstruction that I
give to my clients each year
Please fill out attached worksheets and include the following information. Separate Sheets have to be done for each Tax Year.
I. Gross Income From Business (not included in 1099’s) _________________
? If total deposits into all bank accounts exceed (including 1099’s) this amount please explain where the excess money came from
? Attach all 1099’s with a brief description of source
II. Did you purchase items that you sold in your business? If yes I will need to speak with you concerning inventory and costs of the items purchased especially for resale. Do not include these items on the attached Worksheet
II. Year Make and model of all cars
_______________________
_______________________
_______________________
Total Business Miles (Separate amount for each car)
If you do not have records you will need to reconstruct mileage. (Note: It is important that you record your odometer readings on your car at the beginning and end of each year. They’re several methods for keeping track of your business miles. The most accepted is to keep a running record in chronological order showing date, destination, purpose, beginning odometer reading and ending odometer reading for every business destination for each car).
A. Steps to Determine total Miles driven for the year
- Step #1
Look for Smog reports, mechanic work orders or any other documents that have your odometer readings for tax year and previous tax year.
- Step #2
Check the odometer readings and try to determine as close as possible the odometer readings at the beginning of the year and end of the year.
- Step #3
Take the odometer reading closest to the beginning of the current tax year or closest to the end of the previous tax year. Take the odometer reading that is closest to the end of the current tax year. Subtract the difference and divide by the number of months between the two documents. This will give you a statistical average of the number of miles that you drive per day.
B. Steps to determine business miles driven for the year
- Step #1
Determine your daily routine. Do you start each day at your home office? (If you are not doing so start doing it now. Establish home office hours and put in writing) If you start your day from your home office and then go to your salon then distance from your home office to your salon is business miles. Multiply this distance times two and then times the number of days you go to your salon
- Step #2
Check you bank statement and determine the number of times you went to the bank and made deposits. If you go from your salon to the bank take the distance from the salon to the bank. If your normal policy is to go to the bank from your home office take the mileage from your home office to the bank. Multiply this distance times the number of times you went to the bank to make deposits. Repeat the process but this time in reverse. If you normally go from the bank to your home office use that mileage. If you normally go to your salon from the bank use that mileage and multiply it by the number of times you make deposits
- Step #3
If you attended any seminars or workshops that you drove to during the year. Look up the dates and location. Go to either mapquest.com or expedia.com get the mileage either from your home office or your salon and double the amount.
- Step #4
f you meet with any clients, meet with any tax preparer, account or attorneys for your business repeat Step#3 for each
- Step #5
If you drove to pick up any supplies either for office or your salon repeat step 3 for each location that you drove to. Make sure that your starting point is either from your Home Office or Salon.
Other Items Needed
- Copy of all 1098’s (Mortgage interest – this info seems to be on your transcripts)
- Any repairs made in the Tax Year on your home (any made on salon include on worksheet)
- Registration fees paid on all cars in Tax Year
- Any charitable contribution I need amount and to whom they were made. If clothing items let me know and we will give you s special worksheet for)
- Property taxes
- Insurance on Your Home (Business Insurance paid on Salon include on Expense Sheet)
- Utilities paid on your home during Tax Year on Your Home. (Any utilities paid on salon include on worksheet
- Birthrates for all your children
- Copies of children’s Social Security Cards & Your
Bryan L. Kinney
http://TheTaxmasters.com
http://TheWidgeteers.net
