by The MDTAXES Network | Jan 11, 2017 | IRS, Mileage rate
The IRS announced that the standard mileage rate will decrease to 53.5 cents per business mile driven in 2017.? That is a decrease of approximately 1% from the 54 cents allowed in 2016.? According to the IRS, “The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile.”
When you use your car for business, driving between job sites is deductible.? So is driving between your home and a temporary job site (where you will work for a year or less), job interviews, and conferences.? Commuting between your home and a regular place of business generally isn’t tax deductible.
Standard Mileage Rates Versus Actual Expenses
There are two ways for you to calculate your automobile expenses.? You can either claim $.53.5 per business mile driven in 2017 (decreased?from $.54 for 2016), or you can base your deduction on the percentage of miles your car was driven for business purposes multiplied by the actual costs incurred during the year.? Allowable costs include gas, insurance, repairs, parking at home, and either your lease payments, or if you own your car, a factor for depreciation.
Generally, unless you drive your car?relatively few miles each year?with most of those miles?being allowable business miles, you’re often times better off over time by basing your deduction on the standard mileage rate.
For Example
Let’s say you lease a car for $400 a month that you drive only 3,000 total miles during the year.? And of those miles, 2,000 qualify as deductible business miles.? By calculating your deduction based on the standard mileage rate, you’ll end up with a deduction of just $1,070 (2,000 business miles * $.535 per mile).
What would your deduction be based on the actual expenses incurred, assuming you spend $1,200 on insurance, $.10 per mile driven for gas, and $1,200 on parking at home?? Based on $7,500 of total automobile expenses (including the lease payments), multiplied by two-thirds (2,000 business miles divided by 3,000 total miles), your allowable deduction for your automobile expenses jumps to $5,000 – almost five times the $1,070 allowed using the standard mileage rate.
Now let’s see what happens if you drive 20,000 total miles during the year.?? Assuming your allowable business miles remains at 2,000, you can either claim an automobile deduction of $1,070 based on the standard mileage rate, or $920 based on one-tenth (2,000 business miles divided by 20,000 total miles) of your actual automobile expenses incurred.
| Expense |
3,000
total miles
driven |
20,000
total miles
driven |
| Lease payments |
$4,800 |
$4,800 |
| Insurance |
$1,200 |
$1,200 |
| Gas ($.10 per mile driven) |
$300 |
$2,000 |
| Parking at home |
$1,200 |
$1,200 |
| ? |
? |
? |
| Total costs |
$7,500 |
$9,200 |
| ? |
? |
? |
Business use % on 2,000
business miles driven |
66.67% |
10% |
| ? |
? |
? |
Allowable deduction for
auto expenses based
on actual expenses |
$5,000 |
$920 |
How to Claim The Deduction
Taxpayers who are compensated as employees generally will claim their deductible automobile expenses as an unreimbursed employee business expense. These type expenses are reported on a Form 2106and are deducted as a miscellaneous itemized deduction on theSchedule A.? Keep in mind that miscellaneous itemized deductions are only allowable to the extent they exceed 2% of your income, and are not allowable when calculating the Alternative Minimum Tax (AMT).
Those taxpayers compensated as independent contractors will?generally claim their allowable automobile expenses directly against their self-employment?income. For these taxpayers, automobile expenses should be reported the Schedule C.
Moving, Medical and Charitable Miles
The use of an automobile in connection with a charitable activity is set by statute and is deductible at a rate of?14 cents per mile in 2017 and should be reported with other charitable contributions as an itemized deduction of the Schedule A.?
You’ll deduct any mileage?driven in connection?with a qualified move at a rate of?17 cents per mile in 2017, down from 19 cents per mile in 2016 and 23 cents per mile in 2015, and should report that mileage along with your other allowable expenses on a Form 3903, Moving Expenses.
And don’t forget that?medical related mileage is also deductible.? For 2017, medical mileage is allowable at 17 cents per mile,?and should be reported with all other medical expenses on the Schedule A.
Why lower rates for medical and charitable mileage? According to the IRS, “The rate for medical and moving purposes is based on the variable costs”, but omits the fixed costs allowed when calculating the business standard mileage rate.
Additional info and links is available at IR-2016-169, Dec.13, 2016
by The MDTAXES Network | Oct 14, 2015 | IRS
The IRS recently announced that hundreds of thousands of taxpayers might be at risk of identity theft in connection with the GetMyTranscript tool offered on the IRS website.
ID thieves tried to access copies of people?s tax returns through this feature. The IRS has since halted the feature on their website. They have also researched the attempts to access taxpayer?s information and were able to determine if the attempts were successful or failed.
If someone attempted to access your tax returns through the website, the IRS will mail you a letter letting you know of the attempt and if they suspect it was successful or not. The letters also include important steps you should take to protect your identity, as a result of the breach.
If you receive a notice from the IRS, please make sure to forward a copy to our offices. For more info, please visit the IRS website at www.irs.gov.
by The MDTAXES Network | Oct 30, 2014 | IRS
From the IRS News, IR-2014-72, June 10, 2014
WASHINGTON ? The Internal Revenue Service announced the adoption of a “Taxpayer Bill of Rights” that will become a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights.
The Taxpayer Bill of Rights takes the multiple existing rights embedded in the tax code and groups them into 10 broad categories, making them more visible and easier for taxpayers to find on?IRS.gov.
Publication 1, “Your Rights as a Taxpayer,” has been updated with the 10 rights and will be sent to millions of taxpayers this year when they receive IRS notices on issues ranging from audits to collection. The rights will also be publicly visible in all IRS facilities for taxpayers and employees to see.
“The Taxpayer Bill of Rights contains fundamental information to help taxpayers,” said IRS Commissioner John A. Koskinen. “These are core concepts about which taxpayers should be aware. Respecting taxpayer rights continues to be a top priority for IRS employees, and the new Taxpayer Bill of Rights summarizes these important protections in a clearer, more understandable format than ever before.”
The IRS released the Taxpayer Bill of Rights following extensive discussions with the?Taxpayer Advocate Service, an independent office inside the IRS that represents the interests of U.S. taxpayers. Since 2007, adopting a Taxpayer Bill of Rights has been a goal of National Taxpayer Advocate Nina E. Olson, and it was listed as the Advocate?s top priority in her most recent Annual Report to Congress.
“Congress has passed multiple pieces of legislation with the title of ‘Taxpayer Bill of Rights,'” Olson said.?“However, taxpayer surveys conducted by my office have found that most taxpayers do not believe they have rights before the IRS and even fewer can name their rights. I believe the list of core taxpayer rights the IRS is announcing today will help taxpayers better understand their rights in dealing with the tax system.”
The tax code includes numerous taxpayer rights, but they are scattered throughout the code, making it difficult for people to track and understand. Similar to the U.S. Constitution?s Bill of Rights, the Taxpayer Bill of Rights contains 10 provisions. They are:
- The Right to Be Informed
- The Right to Quality Service
- The Right to Pay No More than the Correct Amount of Tax
- The Right to Challenge the IRS?s Position and Be Heard
- The Right to Appeal an IRS Decision in an Independent Forum
- The Right to Finality
- The Right to Privacy
- The Right to Confidentiality
- The Right to Retain Representation
- The Right to a Fair and Just Tax System
The rights have been incorporated into a redesigned version of Publication 1, a document that is routinely included in IRS correspondence with taxpayers. Millions of these mailings go out each year. The new version has been added to IRS.gov, and print copies will start being included in IRS correspondence in the near future.
by The MDTAXES Network | Aug 12, 2014 | IRS, Taxes
Yikes!? I got the call.
As we wrote in an article from our?May 2014 blog, identity theft in connection with federal tax filings is on the rise.? One specific fraud involves people receiving phone calls from scammers posing as IRS agents and then being aggressively instructed to wire money directly to the scammer to pay off a fictitious tax debt.
Here is a transcript of the automated voicemail message left on my home phone last month by someone trying to commit this fraud on me:
You received this message.? I need you or your retained attorney to return this call.? The issue at hand is extremely time sensitive.? I’m officer Hannah Gray from the Internal Revenue Service and the hot line to my position is 415-251-9813.? I repeat, it’s 415-251-9813.? Don’t disregard this message and return this call before we take any legal allegation against you.? Goodbye and take care.
If I weren’t aware that this scam existed, my initial reaction would have been to call the number left by the scammer as soon as possible.? But remember, the IRS does not send e-mails or make phone calls like these to taxpayers. Instead, the IRS is continually warning taxpayers about scams like this; including the following press release issued last Halloween:
IRS Warns of Pervasive Telephone Scam
IR-2013-84, Oct. 31, 2013
WASHINGTON ? The Internal Revenue Service today warned consumers about a sophisticated phone scam targeting taxpayers, including recent immigrants, throughout the country.
Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver?s license. In many cases, the caller becomes hostile and insulting.
?This scam has hit taxpayers in nearly every state in the country.? We want to educate taxpayers so they can help protect themselves.? Rest assured, we do not and will not ask for credit card numbers over the phone, nor request a pre-paid debit card or wire transfer,? says IRS Acting Commissioner Danny Werfel. ?If someone unexpectedly calls claiming to be from the IRS and threatens police arrest, deportation or license revocation if you don?t pay immediately, that is a sign that it really isn?t the IRS calling.? Werfel noted that the first IRS contact with taxpayers on a tax issue is likely to occur via mail.
Other characteristics of this scam include:
- Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
- Scammers may be able to recite the last four digits of a victim?s Social Security Number.
- Scammers spoof the IRS toll-free number on caller ID to make it appear that it?s the IRS calling.
- Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
- Victims hear background noise of other calls being conducted to mimic a call site.
- After threatening victims with jail time or driver?s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
If you get a phone call from someone claiming to be from the IRS, here?s what you should do:
- If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue ? if there really is such an issue.
- If you know you don?t owe taxes or have no reason to think that you owe any taxes (for example, you?ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the?Treasury Inspector General for Tax Administration?at 1.800.366.4484.
- If you?ve been targeted by this scam, you should also contact the Federal Trade Commission and use their ?FTC Complaint Assistant? at FTC.gov.? Please add “IRS Telephone Scam” to the comments of your complaint.
Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.
The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information.? This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to?phishing@irs.gov.
More information on how to?report phishing scams?involving the IRS is available on the genuine IRS website, IRS.gov.
by The MDTAXES Network | Jun 9, 2014 | IRS
From IRS.gov:
The IRS has been alerted to a new email phishing scam. The emails appear to be from the IRS and include a link to a bogus web site intended to mirror the official IRS web site. These emails contain the direction ?you are to update your IRS e-file immediately.? ?The emails mention USA.gov and IRSgov, though notably, not IRS.gov (IRS-dot-gov). Don?t get scammed. These emails are not coming from the IRS.
Taxpayers who get these messages should not respond to the email or click on the links. Instead, they should forward the scam emails to the IRS at?phishing@irs.gov. For more information, visit the IRS’s?Report Phishing?web page.
The IRS does not initiate contact with taxpayers by email, texting or any social media. ?The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. ?And remember, the IRS will always send taxpayers a written notification of any tax due via the U.S. mail.
by The MDTAXES Network | Jun 5, 2014 | IRS, Taxes
The Internal Revenue Service issued a warning for consumers to guard against sophisticated and aggressive phone scams targeting taxpayers.? Reported incidents of this type of crime continue to rise nationwide.
The phone scam frequently targets recent immigrants and threatens them with deportation, arrest, having their utilities shut off, or having their driver?s licenses revoked.? Callers try to scare their potential victims and are frequently insulting and hostile.
Victims have also been told they are entitled to big refunds, or that they owe money that must be paid immediately to the IRS. When unsuccessful the first time, sometimes the phone scammers call back trying a new strategy.
One way to know that these calls are a scam is to remember that the IRS will always send taxpayers a written notification of any tax due via the U.S. mail. The IRS never asks for credit card, debit card or prepaid card information over the telephone.
From IRS.gov, here are some other characteristics of this scam and advice to take if you’re a target:
- Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
- Scammers may be able to recite the last four digits of a victim?s Social Security number.
- Scammers spoof the IRS toll-free number on caller ID to make it appear that it?s the IRS calling.
- Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
- Victims hear background noise of other calls being conducted to mimic a call site.
- After threatening victims with jail time or driver?s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.
If you get a phone call from someone claiming to be from the IRS, here?s what you should do:
- If you know you owe taxes or you think you might owe taxes, call the IRS at 1.800.829.1040. The IRS employees at that line can help you with a payment issue, if there really is such an issue.
- If you know you don?t owe taxes or have no reason to think that you owe any taxes (for example, you?ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 1.800.366.4484.
- If you?ve been targeted by this scam, you should also contact the Federal Trade Commission and use their ?FTC Complaint Assistant? at FTC.gov.?Please add “IRS Telephone Scam” to the comments of your complaint.
Taxpayers should be aware that there are other unrelated scams (such as a lottery sweepstakes) and solicitations (such as debt relief) that fraudulently claim to be from the IRS.
The IRS encourages taxpayers to be vigilant against phone and email scams that use the IRS as a lure. The IRS does not initiate contact with taxpayers by email to request personal or financial information.?This includes any type of electronic communication, such as text messages and social media channels. The IRS also does not ask for PINs, passwords or similar confidential access information for credit card, bank or other financial accounts. Recipients should not open any attachments or click on any links contained in the message. Instead, forward the e-mail to phishing@irs.gov.
More information on how to report phishing scams involving the IRS is available on the genuine IRS website, IRS.gov.
?
