gas and auto expenses deductable?
im sure this has been asked a zillion times but i searched and cant find the thread. link, anyone? :)
if i use my car only for transportation to and from work and travel approx. 140mi round trip x 4-5days a week...
is gas deductable?
is basic maintaince (sp?) deductable? ie oil/filter change tire rotation
are parts replacements and/or repairs deductable?
Re: gas and auto expenses deductable?
if you are just driving back and forth to your regular club, no...
but if you are like featuring or something, yes.
but damn, that's a lot of driving! I can see why you'd want to.
Re: gas and auto expenses deductable?
If your 'commute' only consists of driving from home to your place of work ... and back again at the end of the shift ... then this is completely NON-DEDUCTIBLE - not the gas, not the mileage, not the auto maintenance of any sort.
However, there is a way to MAKE these costs a legitimate deduction - but that would require that you A. form a corporation, and B. let your corporation buy a second car for business use only so that your present 'personal' vehicle is used for shopping trips etc. With 30,000 miles per year of 'business travel' the equivalent cash value of the business expense auto deductions plus being able to claim corporate vehicle depreciation as a dollar-for-dollar write-off against your dancing income may very well be worth the extra hassle of going corporate. But to be sure that this would fly with the IRS, it would probably be necessary to work at a few different clubs throughout the year (even if it's only a few nights here and a few nights there), since they are sticklers about improper auto expense deductions for persons who only 'commute' from their home to their single place of business day after day.
Re: gas and auto expenses deductable?
You can write off the vehicle and mileage if you use it for private parties (or say you do). Flexible transportation is important for party dancing. It would be similar to a florist delivery vehicle.
The only problem is that the deduction for vehicles hasn't gone up in a very long time. I think it is around .45 cents a mile. That hardly covers fuel today, much less maintenance.
Re: gas and auto expenses deductable?
^^^ however, when you have one vehicle which owned by and used exclusively for business, you can deduct ACTUAL operating and maintenance expenses ... in addition to writing off depreciation - which results in a far higher total tax savings than the 51 cents per mile (or whatever) IRS all-purpose vehicle mileage allowance for a 'multi-use' vehicle shared between business and personal use.
Re: gas and auto expenses deductable?
You can do all the things Melonie said and still not be home free it will depend on whatever the IRS agent looking at your return chooses to believe. They have been stickler for a long time now about vehicle expense write offs, mainly because way back when, in the 70's and 80's it was so abused.
If all of your commutes are to the same club you will be in trouble. If you go the route Melonie suggested that may work but it is also possible that "they" may come to believe that the only reason that you worked at those other clubs, that handful of times was to make you deduction look better, that wouldn't be good, also if you don't have 1099's or some other "supporting documents" from those clubs IE it's just not your word or self generated documents they may choose to believe that you never actually worked there at all . Motel reciepts may not be enough, if the "other clubs" are in the same town as the "main club" again did you really work there.? If they are for somewhere else how do you prove it wasn't just a "vacation" to where ever?
You also have to get them to believe that your use each vehicle for it's stated purpose on a regular basis. If your "personal vehicle" is a 15-20 year old POS and the "company vehicle" is a brand new Corvette they may conclude that despite the fact that it is insured and has current plates that it really just sits in your driveway and the Corvette is what you really drive for both business and personal use.
Back in the day a lot of people who sold Amway or Tupperware ETC. used to go out and buy sold old clunker and put it up on blocks in the backyard so that it would look like they did in fact have both a personal and a business vehicle.
If you don't get audited then it does not matter but if you do it often comes down to what "they" choose to believe.
Re: gas and auto expenses deductable?
^^^ to be squeaky clean on the business vehicle, it would have to be purchased new or nearly new in the name of your business.
Re: gas and auto expenses deductable?
^yeah i thought so :( stupid petrol
heres another related q: can i at least write off gas that i would use to get to school? or would my car still need to be corporate property and only used for a to b traveling?
Re: gas and auto expenses deductable?
nope school also falls under the irs definition of 'commuting'.
Re: gas and auto expenses deductable?
gah! stupid taxes!
thank you for all the responses :) you were all very helpful.
Re: gas and auto expenses deductable?
Is there any loophole if you are part of an organized carpool? Wasn't there some environmental incentive at one point?
Re: gas and auto expenses deductable?
Do you have another job? I think that if you have two jobs, you can deduct the cost of traveling from one workplace to the other.
Re: gas and auto expenses deductable?
^That's what my CPA decided would be best to take.
I was surprised that I could take the deduction for my commuting to medical things. This past week alone, it was five hours driving to and from my visits.
Re: gas and auto expenses deductable?
Quote:
Originally Posted by
Melonie
If your 'commute' only consists of driving from home to your place of work ... and back again at the end of the shift ... then this is completely NON-DEDUCTIBLE - not the gas, not the mileage, not the auto maintenance of any sort.
However, there is a way to MAKE these costs a legitimate deduction - but that would require that you A. form a corporation, and B. let your corporation buy a second car for business use only so that your present 'personal' vehicle is used for shopping trips etc. With 30,000 miles per year of 'business travel' the equivalent cash value of the business expense auto deductions plus being able to claim corporate vehicle depreciation as a dollar-for-dollar write-off against your dancing income may very well be worth the extra hassle of going corporate. But to be sure that this would fly with the IRS, it would probably be necessary to work at a few different clubs throughout the year (even if it's only a few nights here and a few nights there), since they are sticklers about improper auto expense deductions for persons who only 'commute' from their home to their single place of business day after day.
In most states, forming a small corporation is an absolutely terrible idea, both from a regulatory standpoint and a tax standpoint. The overwhelmingly preferred business forms are the LLP and LLC. In Texas, there is aboslutely no legitimate reason to form a corporation over an LLC for small-business purposes.
Re: gas and auto expenses deductable?
^^^ true in most states. However, a few states allow the formation of C corporations without a whole lot of hassle - and also don't require that the filer be a resident of that state. I'm thinking Maryland and Nevada for starters ???
I would also speculate that forming a C corporation may wind up saving high earning dancers a whole lot in taxes if Obama is elected, by transmuting 'income' subject to (greatly increased) Social Security and Medicare tax into 'dividend payments' which are not subject to these taxes ?
Re: gas and auto expenses deductable?
Quote:
Originally Posted by
Melonie
^^^ true in most states. However, a few states allow the formation of C corporations without a whole lot of hassle - and also don't require that the filer be a resident of that state. I'm thinking Maryland and Nevada for starters ???
I would also speculate that forming a C corporation may wind up saving high earning dancers a whole lot in taxes if Obama is elected, by transmuting 'income' subject to (greatly increased) Social Security and Medicare tax into 'dividend payments' which are not subject to these taxes ?
I'm pretty sure that a C corp will not provide favorable tax treatment under Obama's plan. Currently, corporate earnings are taxed, and then any distributions taxed again as personal income (ie. double taxation). I don't know the particulars of any of Obama's tax plans, but, I doubt it they be friendly to corporations. Ultimately, a C-Corp is definitely not the way to go.
If you are really stuck on corporations, a S-Corp provides pass-through taxation, but you still have to comply with all the rules regarding corporate governance. I understand that some states are more lenient than others. However, it is preferable to avoid governance rules altogether rather than to find a lenient jurisdiction. FWIW, Delaware is generally regarded as the most lenient jurisdiction.
The downside of this is that Texas (and most other states) requires ANY corporation doing business here to file and maintain a couple minimum standards.
If your plan is purely tax avoidance and deferral, there are better tools than corporations. One of the most common ways to stash money [for now] is in Limited Family Partnerships. It is currently one of the biggest tax avoidance vehicles for the upper middle class. Tax isn't really my thing, so you would have to talk to an accountant/attorney to really get the full details, but I have read that high earners can substantially reduce their tax liability.
Re: gas and auto expenses deductable?
Quote:
I'm pretty sure that a C corp will not provide favorable tax treatment under Obama's plan. Currently, corporate earnings are taxed, and then any distributions taxed again as personal income (ie. double taxation).
Ah yes but there are really two different taxes to consider ... corporate / personal income taxes, and employer / self-employed Social Security and Medicare taxes. The point about Obama was his proposal to raise the cap on the collection of Social Security taxes, which means that any full time high earning dancer is probably going to face paying an additional 15.3% in self-employment taxes on any amount she earns over the present SSI tax cap. This is all straight up legal tax avoidance i.e. paying 15.3% SSI + medicare tax on 'individual income', versus not paying 15.3% SSI + medicare tax on 'dividend income'.
Obama also supports lowering the federal corporate income tax rate from 35% to 30.5%, which arguably will put the corporate income tax rate at a lower level than the individual income tax rate above the $97,500 income level of the current SSI tax cap. And depending on how 'corporate earnings' versus 'dividend payouts' is split up versus expenses, it's very likely that the de-facto combined corporate and individual tax rate will come in somewhere around 25%, which is significantly lower than the 28% or 31% income tax rates that would apply to either individual income or 'pass through' LLC income.
Not wanting to get overly political, but if Obama does get elected the art of legal tax avoidance is going to become a huge issue for full time 'high end' dancers ... i.e. 'single' girls who regularly earn $2000+ per week. We need to crank up the 'research team' !!!
PS while Limited Family Partnerships work very well in some contexts, where an 'Adult Business' is concerned that tack generally carries 'baggage' that other family members don't want to accept !
Re: gas and auto expenses deductable?
Quote:
Originally Posted by
phonehome
If all of your commutes are to the same club you will be in trouble. If you go the route Melonie suggested that may work but it is also possible that "they" may come to believe that the only reason that you worked at those other clubs, that handful of times was to make you deduction look better, that wouldn't be good, also if you don't have 1099's or some other "supporting documents" from those clubs IE it's just not your word or self generated documents they may choose to believe that you never actually worked there at all . Motel reciepts may not be enough, if the "other clubs" are in the same town as the "main club" again did you really work there.? If they are for somewhere else how do you prove it wasn't just a "vacation" to where ever?
You also have to get them to believe that your use each vehicle for it's stated purpose on a regular basis. If your "personal vehicle" is a 15-20 year old POS and the "company vehicle" is a brand new Corvette they may conclude that despite the fact that it is insured and has current plates that it really just sits in your driveway and the Corvette is what you really drive for both business and personal use.
Back in the day a lot of people who sold Amway or Tupperware ETC. used to go out and buy sold old clunker and put it up on blocks in the backyard so that it would look like they did in fact have both a personal and a business vehicle.
If you don't get audited then it does not matter but if you do it often comes down to what "they" choose to believe.
You mentioned 1099s as proof that you worked in various locations...what if you do private parties...how do you prove then that you dont always work at the same place?
Re: gas and auto expenses deductable?
In a word you can't
If you work for yourself and work for cash you are pretty much screwed, if the IRS chooses to believe you or you don't get audited to begin with Ok fine but if they don't believe you then there is nothing "independent" that you can provide for "proof'
If you work for an agency, maybe even get paid by check, they are in one place and they probably won't provide anything that will show just exactly where you actually "worked" If they were to provide you with "work orders" via fax or E-mail that said where you actualy had to show up that might work but if it is all verbal IE go to the holiday Inn RM. 208 that most likely won't work out.
Re: gas and auto expenses deductable?
Well, when I did my taxes, my accountant said I could use the mileage to and from work, and for going to the tanning salon, buying clothes for work and anything that had to with travel for work and that's it. My mom is an accountant and she told me the same thing. Other than that though, nothing else was deductible for my vehicle. I don't see why gas isn't a deductible, but I guess it would be hard to prove that the gas was only used for work purposes. I believe you get .14 on the mile for a deduction. Both my mom and my accountant told me that it's very important because you can get a nice deduction from it. However, you have to keep track of your mileage.
I haven't had a problem doing this and the lady that I used does everything by the book. She wasn't one of those accountants who will do everything in their power to get deductions that are not legally deductible.
I also own two businesses in which my truck is used ONLY for business, and everything from oil changes, tires, mileage,gas and repairs are deductible. You do not have to be a corporation to do this,as my businesses are considered a sole propriorship, which means it is owned by one individual, me. Like I said, this was advised to me, by two different accountants.
Re: gas and auto expenses deductable?
Greeeyedgrl
First I will go out on a limb and say that you ave never been audited.
I hate to burst your bubble on this but you accountant does not "go by the book" Not any book from the IRS anyway. As far as your mom that agrees well ....
If you do not want to take my word for it you can take Melonies, who I would knows as much about taxes or anything else dancer related as anyone here.
By the way, that mileage figure that the IRS allows, which is 30 some cents per mile these days is designed to cover ALL expenses, gas, maintenance, oil changes, tires, whatever. So this idea that she is not deducting your gas is just wrong.
Accountants are not "automatically" tax experts, they are "book keepers" a lot do taxes but alot, probably most have had no formal training by the IRS. Many have little more than the professional version of Turbotax, that they just plug numbers into. Maybe in the past they worked a season for H&R Block.
Back in the day for quite a few years I participated in a program called VITA (Volunteer Income Tax Assistance) a program sponsered by the IRS to assist low income and elderly people with there taxes. Every year we would recieve 2 weeks of training from actual IRS agents, they taught us what THE LAW said. It was often quite different from what the majority of "accountants" or H&R Block types said "you could get away with".
You have an accountant that has not tried to write off your boob job, lipo, tanning gym membership, hair and nails and everything else under the sun like some try to do but that does not mean that the things she has written off were within the tax code.
What accountants at least some have become good at is figuring out far outside the law they can get deduction/dollar wise and not raise any red flags to trigger an audit and this is what most of them do, that doesn't mean it's legal. Not getting audited means nothing, that you didn't get caught, nothing more nothing less.
This year, next year, your return could be part of that 1% that always get pulled for a look see and some IRS agent is going to notice these deductions, with a few key strokes will be able to call up your past years returns and see the same thing. Before you know it you will get a letter in the mail asking for you to explain.
My accountant said it was OK will not be a good enough answer.
Don't be surprised when this accountant sells you down the river to save her own skin. "honest MR. IRS agent, she told me she had two cars, one for business" "she told me this" "she told me that"
The analogy I like to use is that just because you drove down the freeway the other night at 95 and didn't get a ticket becuse there were no cops out does not mean that all the sudden the speed limit is now 95
I would also be a little interested to know how two seperate businesses could own your "one" truck
Re: gas and auto expenses deductable?
there really isn't any argument on this subject, because the IRS is VERY clear ...
(snip)"Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. "(snip)
(snip)"You are traveling away from home if your duties require you to be away from the general area of your tax home for a period substantially longer than an ordinary day's work, and you need to get sleep or rest to meet the demands of your work while away.
Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home."(snip)
(snip)"travel expenses paid in connection with an indefinite work assignment are not deductible. Any work assignment in excess of one year is considered indefinite. Also, you may not deduct travel expenses at a work location if it is realistically expected that you will work there for more than one year, whether or not you actually work there that long"(snip)
All I can say on the real world consequences of attempts to claim a business expense deduction for auto expenses incurred while travelling between 'home' and 'work' locations in the same city ... or even adjacent cities that are 100+ miles away, is what recently happened to one of my friends during an audit. My friend is a hypnotherapist and puts on regular seminars in both nearby and distant cities. When audited by the IRS, the only business expense deductions for auto expenses that the IRS auditor allowed were those that were accompanied with an overnight hotel receipt. Even for seminars held in cities up to 2-3 hours away, the IRS auditor claimed that auto expenses were not deductible since this is still considered to be a 'commute' in the absence of an overnight stay. Since this involved several thousand dollars worth of disallowed deductions, my friend was not pleased when the IRS auditor made him pay up an extra $2000 in taxes, plus interest. He was even less pleased when the IRS auditor questioned other entries in his tax return, resulting in an even higher tax bill !
I would add that the claiming of significant dollar amounts of business expense deductions for auto expenses is one of the 'red flag' categories programmed into the IRS computers to flag tax returns for potential audit. Because of this, if a tax return is filed with auto expense deductions that are 'high' compared to the amount of business income claimed (and I can't tell you what threshold the IRS has programmed as 'high') the probability of your return being audited could be greatly increased versus the 1%-2% probability of a 'random audit' for returns that don't wave 'red flags'. And as my friend discovered, once a tax return is flagged for an audit, everything on that tax return is subject to review by the IRS auditor not just the 'red flag' entry.
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