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Lane
Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3987
Experience:  Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
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Hi There! I use my personal vehicle for travel as part of my

Resolved Question:

Hi There! I use my personal vehicle for travel as part of my start-up LLC business. I keep track of my miles to a client, but I do not want to be reimbursed since I wanted to write-it off as a business expense. How do I track the business expense in Xero?
Submitted: 10 months ago.
Category: Tax
Expert:  Lane replied 10 months ago.

Lane :

Hi, for business use of a car the easiest way to take this as a tax deduction is to use the mileage method ... and all IRS requires for that is written evidence (What many do is simply write the miles next to the appointment in an appointment book ... The current IRS rate is 56.5 cents per mile

Lane :

You can also use the ACTUAL expense method, but must multiply the years' expenses by the proportion (percentage) of the use of your car thats for business use

Lane :

In terms of Xero, the actual method might be more conducive to using an accounting system .. you'd just enter the actual expenses (factored by the business use) and enter it as a business travel expense

Lane :

BUT you'd have to already know what the percentage for the year would be

Customer:

So is Xero not a good accounting system to use?

Lane :

you could also use the actual mileage x 56.5 as an expense (although that may or not actually reflect your true expenses)

Customer:

I will not be using the ACTUAL expense method, but instead write my miles down with to and from, dates, and the reason. Then multiple by 56.6

Customer:

So would I enter this as an Expense Claim but not reimburse myself?

Lane :

No its as good as any other ... it's just that most don't use the accounting system just to track business miles... typical use would be to enter it one time at the end of the year as an actual expense ... either way work really

Lane :

YOu just need to decide whether you're going to use the mileage method or the actual cost method

Customer:

Oh okay, don't enter it monthly, just at end of year.

Customer:

Okay perfect. Thank you so much for your help!

Lane :

Yep, I would (1) use mileage... much easier to keep up with (just be sure you have something written (no receipts needed) maybe a mileage log or just use your appointment book or calendar and (3) enter it as an expense (either at the end or along the way)

Lane :

sorry number (2) was the no receipts needed part

Lane :

Your very welcome

Customer:

So I'm not able to claim fuel correct even though i use a business credit card?

Lane :

thats right ... if you go the actual expense method you can (along other things like depreciating the car regular maintenance, etc) but then you have to factor it by how much was business and how much was personal ... I've always found that the mileage rate was enough to easily Cover all the real expenses

Lane :

much simpler

Customer:

So should I back out my gas receipts from the business card statement and pay it back into the company?

Lane :

Yes, a little trouble now, but again, over time much less to have to track (all the other stuff... office lease computer cost, phone advertising etc etc that'll still need to be kept there)

Customer:

Yes as is pay back into the company?

Customer:

What does "a little trouble now" mean

Customer:

The only expense I have for the LLC are business meals with clients, travel via Amtrak train, and hotel. That usually happens once per quarter

Lane :

OR you could do what some do and keep two sets of books one for tax and one for management purposes ... I mean having to back it out

Customer:

Oh it isn't too bad. I just started doing it..so only about $60 worth of expenses I will pay back into the company. I'll start using my own funds for fuel

Customer:

Of course I charged my LLC filing fees to the credit card too

Customer:

That makes sense.

Customer:

Okay sorry for all of the questions. Thanks again :)

Lane, JD, CFP, MBA, CRPS
Category: Tax
Satisfied Customers: 3987
Experience: Juris Doctorate, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and 5 other Tax Specialists are ready to help you
Expert:  Lane replied 10 months ago.

Hi Jean,

Thanks for the rating.

And congrats on the new business

Go get 'em

Lane

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