Wednesday, June 1, 2011

Mileage deductions:Stay on track to keep the IRS off your back, Part 1

Mileage deductions: One of the true gifts, and neglected aspects of your business or personal return.

When I talk to business clients, especially a new client interview, one of the things I always go out of my way to talk about is mileage. There are two reasons why I do this.

First, the standard mileage reimbursement rate is usually favorable to taking actual expenses during a tax year. I say usually, because I know of at least two clear instances where taking actual expenses are favorable. At this point let’s just assume that you (as the business owner) would be best served by taking the standard mileage rate.

Second, I understand that usually it is a pain in the butt to keep track of mileage. For this reason, I fear that clients would think to themselves why should I be keeping track of whom I see and why.

They might think, the IRS is giving me the standard mileage rate, all I need to do is estimate the number of miles I have driven and that will be the end of it. These people couldn’t be more wrong.

My next post will cover why mileage logs are instrumental in taking a business expense for mileage on your business or personal return (Sch C).

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