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Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22739
Experience:  Taxes, Immigration, Labor Relations
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I have a $650 a month auto allowance. I am a sales ...

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I have a $650 a month auto allowance. I am a sales person who is required to carry merchandise and product. I own two vehicles. I use one of them exclusivelly for work. I drive to and from my sales area in this car. What % of total business expense does the irs allow me to write off. As per my employer it is only 80%. That is, they give me $650 a month so long as 80% of total expense exceeds $650. My employer tells me that the 80% rule is used because I commute to and from my sales area. Doesnt having two vehicles and beign required by my employer to carry merchandise and product excempt me from this rule?
Submitted: 6 years ago.
Category: Tax
Expert:  Lev replied 6 years ago.

Monthly auto allowance is not limited by the IRS. If paid under non-accountable plan - means you are not required to report your actual expenses - such allowance is considered your compensation and should be reported as such - either on W2 or 1099-misc whatever you receive.

In this case - you may deduct your qualified travel expenses on your individual tax return - either actual expenses or based on mileage rate. Please see more e details in the IRS publication 463 - http://www.irs.gov/pub/irs-pdf/p463.pdf

It doesn't matter if you have two vehicles and if your employer requires you to have a vehicle. There is no limit on business expenses deductions (such as "allows an 80% write off") .

Please let me know if any clarification needed.

Customer: replied 6 years ago.
Reply to LEV's Post: Hello. They allow me 650 total. For a vehicle payment they have a maximum of $246 the rest is towards gas, insurance, maintance, parking, summons and car wash. I am trying to get more money from them. The first thing they tell me is that I use the car for personal use. I guess my question is: Beign that I have 2 cars and that I am required to carry product(beer) and merchandise(signs, neons, glassware etc etc) is the mileage going and coming from my sales area considered business miles? We do have an actuall office but I spent 95% of my time on the field seeing customers. 4 out of 5 days I travel from home to any one of my customers. 5 out of 5 days I travel from a customer to my home. The car is parked in front of my home the rest of the time.
Expert:  Lev replied 6 years ago.

The IRS doesn't regulate how the company compensate your work - that is between you and your employer. As long as you are paid at least minimum wage - there is nothing in the law that may enforce your employer to pay you more.

The issue that the IRS will look - if you are obligated to report back to your employer how you spend car allowances and if you spend them on business related travel.

If you are obligated to report - that means your employer has accountable reimbursement plan and the amount of allowances you received is not included into your income reportable on the W2 form.

If you are not obligated to report back to your employer how the amount of allowances are used - that means your employer has non-accountable reimbursement plan and the amount of allowances you received SHOULD be included into your income reportable on the W2 form as wages. In this case - that is your responsibility to deduct your expenses on your individual tax return.

If that is your car - not the car provided by your employer - you may use it partly for business and partly for personal - there is no any restriction this matter. It doesn't matter if you have two or more cars.

To claim travel expenses deductions - you should have a daily record how many miles you travel for business. Generally you may use mileage rate to calculate your deductions by multiply at $48.5 for 2007. If your employer reimbursed you less than that amount - you may deduct the rest on your tax return.

Customer: replied 6 years ago.
Reply to LEV's Post: Hello. You are great!
Are the miles that I travel from home to my sales route and back considered business miles since I am required to carry product and merchandise? Keeping in mind that I use this car for business only. Thanks
Expert:  Lev replied 6 years ago.

To determine whether you are traveling away from home, you must first determine the location of your tax home. Generally, your tax home is your regular place of business or post of duty, regardless of where you maintain your family home.

If you do not have a regular place of business or post of duty and there is no place where you regularly live, you are considered an itinerant (a transient) and your tax home is wherever you work. As an itinerant, you cannot claim a travel expense deduction because you are never considered to be traveling away from home.

You cannot deduct daily transportation costs between your home and temporary work sites within your metropolitan area. These are nondeductible commuting expenses.

The only situation you may be able to deduct such expenses if you have a home as a regular place of business and you are deducting a business use of your home expenses on the tax return.

Customer: replied 6 years ago.
Reply to LEV's Post: Hi. I need clarification. I live 20 miles from my sales route. I am required to carry merchandise and product by my employer. I use the car exclusively for work. I own 2 other vehicles for my private use. Considering the forementioned, are the miles from my house to my route and from my route to my house considered business miles by the irs? Thanks
Expert:  Lev replied 6 years ago.

Unfortunately in case of audit - the IRS would disallow such deduction.

Travel from home to your work place is always considered a commuting travel and not deductible. Please see IRS explanation here

graphic

The only situation when such travel may be considered job related - if you maintain a work location at home and deduct home-office expenses. If so travel from your home to your job location is considered as travel between one job location to another job location and therefore will be deductible.

Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22739
Experience: Taxes, Immigration, Labor Relations
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