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Rising Gas Prices Increase Business Related Expenses
By Heather Cozby & Christine Bruno
The IRS recently increased the mileage allowance for business use of your personal car from 50.5¢ to 58.5¢ per mile effective July 1, 2008. If you use the standard mileage method to calculate your business deduction, this will is a substantial increase in your tax deduction for 2008.
What type of travel is deductible?
In the ordinary course of business, you should track mileage for:
1) Traveling from one work location to another
2) Visiting customers
3) Attending a business meeting away from your normal work location
Recordkeeping
Taxpayers who use their personal car for work need to keep accurate mileage logs to support their tax deduction. Your daily log needs to include the following:
1) Date of travel
2) Destination/Client location
3) Business purpose for meeting
4) Odometer at start of business travel
5) Odometer at end of business travel
6) Business miles = difference between 5 and 4 above
You should also record the odometer reading at the beginning and end of each year to document the total mileage for the year.
For 2008, you will need to total your business mileage from 1/1/08 - 6/30/08 and 7/1/08 - 12/31/08 to correctly calculate your business mileage at the two different rates.
Remember, commuting to and from your principle place of business is never a deduction.
Tip for Meals & Entertainment Receipts
As often occurs, your business mileage is to meet a client or associate at a restaurant or coffee shop. A quick way tip for documenting this is, before you leave the table, write down the name of whom you were with along with the business purpose of the meeting right on the receipt. Keep these receipts in your tax files to support your deduction.
It’s better to spend the time now to keep your recordkeeping accurate rather than face the IRS later with poor documentation. Unsubstantiated, overstated mileage, meals and entertainment deductions are a large component of the IRS’ estimated $30 billion in taxes underpaid each year. Without proper recordkeeping, your deduction will not be allowed and you may face large tax adjustments with penalties and interest.
Heather Cozby & Christine Bruno
Heather L. Cozby, CPA and Christine L. Bruno, CPA are Managing Partners at Cozby & Bruno LLC. Cozby & Bruno, LLC is a local Certified Public Accounting firm with more than 25 years of combined experience specializing in the diverse and unique audit, tax and consulting needs of small businesses, high net worth individuals, condominium associations, and small nonprofits.
If you have any questions regarding this topic or if you would like our firm to review your prior tax filings, please call (508) 224-4113 for an appointment.
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