[mla1169]

sorry that all I seem to post is OT tax questions but I can’t help a friend with this.

friend is one of those independent couriers, uses own vehicle, tracks mileage to take the mileage deduction. I’m ok there.

Employer will let friend use employers van under the condition that friend fills the gas tank.

My guess is friend cant take mileage deduction for the days he uses employers van, but if he turns in gas receipts (for days he drives someone elses vehicle) and mileage deduction (for days he drives his own vehicle) that would trigger an audit. Anybody know how someone handles their taxes when they drive both their own and their employers vehicles?

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[wmcpa]

Wouldn't unreimbursed employer expenses go under miscellaneous deductions subject to 2% threshold? I'm assuming that he would be itemizing instead of standard deductions. I would keep employer bills separate from courier service mileage/bills. Maybe others with more experience in this could shed some light.

FAR: 83
REG: 69, 69, retake Q1 2015
AUD: Q2 2015
BEC: Q2 2015

[mla1169]

maybe I wasn't clear, friend is self employed independent contractor who occasionally uses the vans that belong to the delivery service that contracts him so these are his business expenses for schedule c.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[taxgeek83]

I'm assuming your friend didn't happen to keep gas and other receipts for his personal vehicle as well? Then you should just be able to compute the actual expenses and not worry about bifurcating it….

[mla1169]

Well he just started doing this about 3 weeks ago, I told him not to bother keeping the receipts but to keep a log of his mileage while working so that I can calculate his mileage deduction. He's got an older model compact car and gas prices keep falling so I realize he'll make out far better in the long run to deduct the mileage and not the actual receipts.

Today he texts me that the company wants him to use their van today. Because its been such a short time if the van becomes a regular thing I'll just have him give me his gas receipts for both his personal car and their van. If its just a one day thing I'll advise him to just absorb the cost of the gas he put in the van today. Wondering though if he drives their van 2 days a week and his own car the other 3 if we just have to go to actual receipts which it sounds like he will.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[taxgeek83]

I was looking through the IRS pubs and I couldn't find a special situation where one would be allowed to use both methods. It actually kind of surprised me that none of the examples mentioned it, unless maybe it's just not that common of a situation. I didn't get into the Code or Regs, but you might go through the Regs and see if there are any more examples in there. I think it's Section 162. Glad he's only been in this a few weeks though – makes it a little easier!

As a last ditch effort, maybe call the IRS? Easier said than done though, I know. 😉

[M.O.D.]

There are two ways to deduct transportation expenses:

Mileage (at IRS rate)

or actual costs: repairs, fuel, tires, maintenance, depreciation, etc (percentage used for work based on mileage ratio)

Generally the deduction is higher for actual expenses but it requires more record keeping, in addition to the mileage log.

You mention it is an older car: although depreciation would be less, repairs would be more.

The method is chosen for each car. If you have multiple cars, all have to be declared.

In this case I would expense his car based on mileage, and the gasoline expense for the truck as an separate expense. If he were to rent a van, or take a taxi, they would be in the same category. Transportation expenses.

A specialist in small business returns would know more.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[mla1169]

MOD I would have thought as you to take the mileage deduction for the car he owns, and the actual receipts for the vehicle that's not his however submitting gas receipts and taking a mileage deduction in the same year is a red flag to the IRS. Now of course he could back up everything showing the dates he used his own car vs the dates he borrowed his clients car but who wants to deal with an IRS audit even if everything is impeccably documented?

Basically you have to choose one or the other, so my answer is to document it both ways for a specific period of time and see which way benefits him the most and choose that one. He can not take a mileage deduction when he is driving a vehicle that someone else owns, that I know for a fact so it comes down to how often he's fueling someone else's vehicle.

FAR- 77
AUD -49, 71, 84
REG -56,75!
BEC -75

Massachusetts CPA (non reporting) since 3/12.

[M.O.D.]

@ mla

Yes it is highly complicated but there are many business situations such as these. I was deducting expenses for three personal vehicles (including my motorcycle) at one point. Though it was all actual expenses and I estimated the mileage and the percentage, I never bothered with a log. My tax accountant, an EA that specializes in small business returns thought it all out. Basically, he explained that a deduction is a deduction, no matter what expense category it falls in, and if you have a profit, the IRS never questions your deductions. I think the IRS figures that if they bother a small business, he'll just shut-up about his income and expenses, go underground, and the IRS won't see a cent. So it is better for them (national policy) to have declared businesses even if they under-report than to have a cash-based economy.

Also, I would advise you to make it an accrual based method (check that box) instead of cash-based. That will also go a long way to legitimate it.

In the end, don't be afraid to advocate (ie go toe to toe with the IRS) for a client. In these cases less than 1% of the returns are audited, and even those are where outrageous things are happening.

The IRS uses a cost-benefit method too, and a definition of what is material. How much more taxes will they be able to squeeze out of a these gas bills, if not documented (which they are). Not much.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[mintz25]

As it sounds more beneficial and is allowed, claim mileage for his own vehicle and gas expense for using the van. Don't think is an audit exposure.

CMA, EA

BEC - 78 8/2014 1x
REG - 82 11/2014 1x
AUD - 76 2/2015 1x
FAR - ???

[Author]

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