More Than Accounting

Archive for January, 2008

Record Keeping Tips: Automobiles

Posted by Rhonda Spaulding on January 24, 2008

The last post gave you some information on how to deduct business mileage. Along with those deductions come record keeping requirements. The IRS requires that you log all business miles in a timely manner. There are many court cases that the IRS has won simply because the taxpayer did not keep adequate records. This is an area that requires discipline. Unfortunately, business owners are usually busy running the business and do not always have time to “jot down” the odometer reading every time they run to the post office. How can you maintain adequate records without pulling your hair out?

Like me, I am sure that many of you were not “born organized”. We have to work at it. So, I have done some searching and tried to come up with some tips to keep your mileage logs simple, yet sufficient.

  1. Write down the beginning odometer reading. This is the beginning of the year (so do it now!)
  2. Keep a calendar or some kind of notebook where you can write down the business trips you make. This does not have to be a separate formal log. You can write things on your regular calendar or store it on your PDA. Just keep it somewhere convenient so that it is easily accessed.
  3. When you make a trip for your business, jot down the place you went. You do not necessarily have to set your trip meter and mileage every single trip at the time. Just note the “to” and “from” locations on your calendar.
  4. Periodically, tally up the miles you have driven from your notebook. These can be logged right there in your notebook. You can get mileage to your locations easily using the internet these days, it is just a click or two away. I would suggest you set a time to do this once per week. Put it on your schedule and set aside a few minutes to get everything up to date, otherwise it will probably become overwhelming if you do any significant traveling. If you are not into details, maybe you ask your spouse or another person who does the details to perform this step.
  5. Make a copy or back it up! If you store this information on paper, make copies periodically as well. Maybe you can do this weekly or once a month depending on the volume. If it is stored on your PDA or computer, do I even need to say back it up?!
  6. Periodically write down your odometer reading or keep your maintenance records which will probably provide that information. Maybe you do this when you get an oil change. Just make sure you get a reading for the end of the year.
  7. Finally, keep your receipts for your actual expenses. One idea might be to put a coupon organizer in your glove compartment and toss in receipts as you get them. Keep your insurance bills and other information in a special file in your office.

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Deduction Primer: Auto Expense Methods

Posted by Rhonda Spaulding on January 24, 2008

Whether you own a business or are an employee, there is a good chance that you will use your car for business at some point. If you are not reimbursed by your employer, these are deductible expenses on your income tax return. I think many make the mistake of doing and then planning. The key to getting the most out of your auto expense deduction is to first determine the method that will save you the most money and then keeping the appropriate records as you go. In addition to both of these methods, you can also deduct costs for parking, tolls and the business portion of finance charges.

Standard Mileage Method

If you use your car for business, you can simply track the business miles and claim a tax deduction for those miles which is multiplied by the IRS mileage rate (48.5 cents/mile). The mileage rate is a combination of depreciation, maintenance and fuel expenses.

Actual Expense Method

The actual expense method uses just that. You will deduct the business portion of the fuel, maintenance, repairs, tires, insurance, registration and any other auto costs. This method requires keeping all of the receipts and tracking all of your expenditures. If you do not have good records for your auto expenses, you will have to use the standard mileage method. There can be problems with taking the accelerated depreciation and your business use falls below 50 percent.

Depending on the circumstances, either one of these methods might provide a better deduction. Your tax preparer can calculate it both ways and determine which is better for you. It may vary from year to year so it is best to keep complete records so that you can take advantage of the method that gives you the largest deduction.

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Links to Make You Think

Posted by Rhonda Spaulding on January 18, 2008

Here are some interesting tidbits from around the web today.

  1. Do you remember the $300 or $600 tax rebate check that you got a few years ago? President Bush is proposing similar rebates once again as fears of an economic slow down dominate the news. It also looks like there are plans for some tax incentives for small businesses as well. Will Congress approve another Bush tax cut after bashing them all of these years?
  2. Keeping with the tax relief theme, the Indiana Congress is right in the thick of determining what can be done to provide property tax relief. The Governor’s plan as detailed in today’s Indianpolis Star focuses on property tax caps for homeowners and shifting some local spending to the state (but don’t forget that 1% increase in the state sales tax). Governor Daniels’ plan seems to be on a fast track in the house.
  3. Many taxpayers often wonder if they should itemize deductions or not. The standard deduction has increased significantly in the past few years but it is always worth it to add up those deductions to see which will get you the smallest tax bill. Here is a handy summary of the differences between the two methods.
  4. As a “crazy right wing conservative”, I am more and more offended that Mike Huckabee is holding himself out to be a conservative. Please tell me that my party will not nominate someone who thinks the Constitution is a “living, breathing document.” Don’t we have enough of that on the Supreme Court already?

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Important January Dates

Posted by Rhonda Spaulding on January 7, 2008

  • January 10 — Employees who work for tips. Previous Months Tips Due to Employer if more than $20.
  • January 15 — Individual estimated tax payments due using 1040-ES. Indiana estimated tax due also. Individuals may file return by January 31 in lieu of this 4th quarter estimated payment. Farmers and Fisherman must pay estimated tax or file return by March 3, 2008 in order to avoid estimated tax penalty. .
  • January 31
  • All Businesses Give annual information statements to recipients of certain payments you made during 2007. See my notes in “1099, 1098..Blast off into 2008!” for informational return details.
  • File Form 941 for 4th quarter 2007 or Form 944 (Annual employer taxes) if applicable.
  • Farm Employers – File Form 943 – Employers Annual Tax Return for Agricultural Employees.
  • File Form 940 to report Federal Unemployment Taxes. If amount due is less than $500 and deposit is made on time, you have until February 11 to file the return.

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