Demystifying Business Mileage Deductions: Guide for Increasing Deductions and Compliant Recordkeeping
Personal vs. Business Mileage Compliance Considerations for filing business tax return
If your home is your principal place of business for a tax return for LLC or any other tax return, you can deduct all of your business trips from your home location. This is the easy part and the home based businesses or consultants who travel do well in this scenario. In this second scenario, if your residence is not your principal place of business and your business travel takes you outside your normal geographic area of work where you normally conduct business then all of these round trip business trips would be a tax deductible business mileage, as long as you will not be there for more than one year. Recall, in this case it would need to be a temporary business trip for less than one year. For example, say your residence is in Irvine, CA and you travel to San Diego, CA then this round trip would be considered a business travel. Again, our tax return services for business clients make an effort to stop at their office first, then they make these business trips to avoid any gray area of normal geographic area of work. The third scenario of business travel is more confusing for an LLC tax return filer or any business taxpayer who does not have their residence home as the principal place of business and does not travel outside of their normal geographic area of work.
If you travel from your home to the office and back to home we already know that is commute and not deductible. However, some of the trip could be business travel, say if a corporate tax return filer stops at a temporary business stop on the way to work and again from office travel to the home, they also make a temporary business stop then in those both scenarios the travel from a regular business stop to the second location would be business travel. Here is an example 1: asmall business tax preparation services taxpayer first stops to meet a potential client and then makes three more business stops and to the office. In this example all of the travels would be considered for business mileage. In example 2: A contractor and our good small business accounting and tax services client stops at a bank first, in this case the bank being a regular business stop and not a temporary business stop because he works and lives there for many years. Then the contractor travels to business stop number 2, 3 and 4 and then to his business warehouse. In this case all of the trips starting from the location of the 1st regular business stop would be a business travel.
Making Your Tax Support Documents Shielded from IRS or State Audit
Tax preparation services for small business clients need to have evidence to support their business use of their vehicles in writing. This evidence or documentation can be in electronic forms. In fact, at Business Taxes and More we recommend efficiency to our corporate tax returns clients. More importantly a federal corporate tax return or any income tax return for small business must use compliant trackers. Like others S corporation income tax return should keep track of the total miles, total commuting miles, total business miles and personal miles which is in addition to commuting miles. An S corporation tax return filer may chose to use Full Year Tracking, a Sampling Method and an Odometer Reading. Let us explore the three IRS acceptable methods briefly. First, the full year tracking is the most accurate but can take a lot of time from federal corporate income tax return filer even with the electronic complaint software or app.
The sampling method or a 90-day period method is also acceptable as long as the taxpayer choses a 90-day period that honestly represents the entire year’s driving. How this works is the taxpayer keeps detailed records for 90 day and calculates how it would be for the entire year. In other words, the taxpayer that delivers Christmas trees does not pick the Christmas Season and extrapolate it over the entire year. Another method would be more fit for this taxpayer. The most traditional way that most small business tax preparation services clients is the usage of the odometer reading. The vast majority of tax return services for businesses clients have reported that they are happy with Taxbot, Everlance, TripLog and MileIQ. We hope that you found this blog informative and valuable. If you want to increase your business bottom line and file an accurate, audit proof business tax return and for your business to advance, then consider Business Taxes and More when you are filing business tax return. We earn our revenue by delivering more to you.
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