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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3718
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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I am trying to get a document that verifies or disproves my

Customer Question

I am trying to get a document that verifies or disproves my accountants travel policy.
We are being told that when an employee that doesnt live anywhere near a office but commutes to random client sites files his mileage expense we are supposed to deduct 35miles in each direction or 70 miles per day before reimbursement at the current IRS rates.

Is there any IRS doc that supports this?
Submitted: 1 year ago.
Category: Tax
Expert:  Lane replied 1 year ago.

NPVAdvisor :

You can deduct certain types of mileage as an employee on your Schedule A – Itemized Deductions. The deduction is allowed to the extent the expenses exceed 2% of your adjusted gross income. Your adjusted gross income is listed on Form 1040, line 37

NPVAdvisor :

56.5 cents per mile for business miles driven. (from: http://www.irs.gov/uac/2013-Standard-Mileage-Rates-Up-1-Cent-per-Mile-for-Business,-Medical-and-Moving )

NPVAdvisor :

Further, here's how the IRS determines your "tax home"

NPVAdvisor :

Factors used to determine tax home. If you do not have a regular or main place of business or work, use the following three factors to determine where your tax home is.

  1. You perform part of your business in the area of your main home and use that home for lodging while doing business in the area.

  2. You have living expenses at your main home that you duplicate because your business requires you to be away from that home.

  3. You have not abandoned the area in which both your historical place of lodging and your claimed main home are located; you have a member or members of your family living at your main home; or you often use that home for lodging.

NPVAdvisor :

Further:

NPVAdvisor :

What Travel Expenses Are Deductible?

Once you have determined that you are traveling away from your tax home, you can determine what travel expenses are deductible.

You can deduct ordinary and necessary expenses you have when you travel away from home on business. The type of expense you can deduct depends on the facts and your circumstances.

NPVAdvisor :

Table 1-1 summarizes travel expenses you may be able to deduct. You may have other deductible travel expenses that are not covered there, depending on the facts and your circumstances.

NPVAdvisor :

Notice that, in the linked table, above they (IRS) say this regarding car expenses: operating and maintaining your car when traveling away from home on business. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking. If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses.

NPVAdvisor :

The only explanation I can think of for the 35 mile statement is that the accountant is trying to establish the commuting portion of a regular travel schedule (commuting is never deductible) ... see this example:

NPVAdvisor :

Commuting is the travel you do to and from your first and most important place of business. Commuting is never deductible. An employee who uses his/her car in the course of business (an itinerant teacher, a salesperson, a minister), gets less of an actual deduction than someone who is self-employed. (See Revenue Ruling 99-7).

NPVAdvisor :

Let's look more closely at the teacher, for instance. Perhaps h/she teaches the Gifted and is responsible for visiting four schools a day. The trip to the first school and home from the last school is commuting and not deductible. However, all the mileage between schools is deductible. Further, if she chooses, on her own time, to go to the grocery and pick up treats for the children, to attend college classes to upgrade her education and skills, to go to the library, or to go to an office supply store, all of that mileage is also deductible. Because h/she is an employee, the employer should sign off on use of that personal car in the teaching day.

NPVAdvisor :

There is no specific 35 mile each way limitation

NPVAdvisor :

Now, it IS important for businesses to pay attention to current federal per diem rates because payment to employees of reimbursements in excess of the federal rates can have tax consequences. If you reimburse more than the maximum allowable rate, the excess is considered a benefit to the employee and must be considered in the employee's taxable income.

NPVAdvisor :

BUT, from IRS, the per-diem rate for mileage is as stated above .... FROM IRS: Per diem or other fixed allowance. You may reimburse your employees by travel days, miles, or some other fixed allowance under the applicable revenue procedure. In these cases, your employee is considered to have accounted to you if your reimbursement does not exceed rates established by the Federal Government. The 2012 standard mileage rate for auto expenses was 55.5 cents per mile. The rate for 2013 is 56.5 cents per mile.

NPVAdvisor :

Hope this helps

NPVAdvisor :

Lane

NPVAdvisor :

I still don't see you coming into the chat ... I'll move us to the &Q&A" mode, .. maybe that will help

NPVAdvisor :

We can still continue a dialogue there, just not in real time as we can here (Let me know if you have further questions)

Expert:  Lane replied 1 year ago.
Our chat has ended, but you can still continue to ask me questions here until you are satisfied with your answer. Come back to this page to view our conversation and any other new information.

What happens now?

If you haven’t already done so, please rate your answer above. Or, you can reply to me using the box below.
Expert:  Lane replied 1 year ago.

Hi Scott,

... just checking back in, as I never saw you come in to the chat.

Again, I have no idea what your accountant is doing unless trying to establish going to the first and coming home from the last appointment commuting.

But if the employees home meets the definition of tax home, then you should simply be using the established mileage rates by IRS for deduction of business use mileage.

That is also the rate that should not be exceeded for reimbursement purposes without the excess being considered a benefit to the employee and must be considered in the employee's taxable income.



Hope this helps

Lane

If this HAS given you enough to make an informed decision, I would appreciate a rating of 3 (OK) or better. (That’s the only way they pay us here) ... But if you need clarification let me know.
Expert:  Lane replied 1 year ago.
Hi Scott,


I'm just following up with you to see how everything is going. Did my answer help?


Let me know,
Lane

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