It is not easy keeping track of business mileage for tax deductions. It involves diligence and persistence. Fortunately, it really pays off though. You can see a reduction in your taxes of hundreds if not thousands of dollars if you manage to do a good job in this area. There are several ways you can go about keeping your records.
1. Use a daily planner. This is the low-tech way to go, but many people prefer it. At the end of each day, you would write down your mileage for the day on the space for that date. The work comes in when you get ready to write it up. You have to go through every page and add up every mile.
2. Incorporate it into your expense report. Some companies use this method. Every time you fill up your gas tank, you are required to write down your mileage. The company will hold the actual records of your business mileage, but you can get copies to file with your taxes so that you can get the tax deductions. This works best if you are the only one using a company car.
3. Create a spreadsheet. If you have a laptop computer, you can bring it along and enter your mileage into your spreadsheet every time you stop for the day. The advantage of having it on a spreadsheet is that the program does the math for you. All you have to do is to set it up the way you want it once and then plug in the mileages as you go.
4. Email yourself your mileage each day. This is ideal for people who travel for days on end. You can use your cell phone to send an email to your email account each day you are on the road. All you need to put it in is the mileage and the date. Then, when you get back home you can record them in your spreadsheet.
5. Add it to the daily job site reports. There are companies that will use their job site reports to keep track of everything from supplies to time on the clock to business mileage. Again, the company will have this information on file and you will have to get copies if you want to use it for your tax deductions.
6. Use your D.O.T. log. If you are an over-the-road trucker, you know that you have to show every mile you drive. Why not use that record to keep track of your business mileage for tax deductions. There are others who may be new to D.O.T. procedures that do not realize that they have everything they need to document their mileage right there.
There are certainly many different ways of keeping track of business expenses for tax deductions. You should be able to save yourself some money this tax season if you travel at all. It is a job, but you it is well worth your time.
For entrepreneurs who are running their own businesses and even for those who are planning to set up their own businesses, the self-employment tax deduction could be a huge blessing. By these deductions, many of the expenses that businessmen incur for their businesses could be put up for tax deductions. There are several such heads where self-employed people can win over employees in tax deductions. A preliminary step for availing of these could be use to their social security number as their business tax identification number and to file taxes under Schedule C or Schedule C-EZ.
Though these schedules are often mentioned together, they provide different kinds of benefits, the form for Schedule C-EZ is more beneficial for people who are spending lesser amounts on running their businesses, or people who make profits with their businesses, who run their businesses single-handedly, i.e. without employing anyone else, or those who do not claim home office deductions and don't report depreciations.
The form for Schedule C is for bigger businesses. Here the taxpayers would be asked about the gross income ? this is similar to the form for Schedule C-EZ ? but in addition they would be asked in detail about the various heads of expenditure in running the business. But the advantage here is, the self-employed person can report a loss and get that saved on tax too.
Self-employed persons can claim the following tax deductions:-
(i)Equipment Expenditure ? As per Section 179, the total cost of all equipment that has been purchased for conducting the business can be shown as tax deductible. Equipment such as computers, filing cabinets and furniture are tax deductible. But there is a limiting condition here. The limit is based on the amount that can be shown for deduction. A better idea can be got by referring to the IRS Publication 946, as this limit is changed quite frequently.
(ii)Travel Expenditure ? All the expense incurred during traveling for the business is also tax deductible. This includes the meals and lodging that go with the travel. It is necessary to produce the receipts and bills of these expenses and to state the purpose of the travel.
(iii)Health Insurance and Social Security Taxes ? All health insurance premiums paid for the self-employed person and for his/her closest family members can be claimed for tax deduction. A part of the social security tax can also be deducted from the total income. This deduction is available on Form 1040 and not on the Schedule C.
(iv)Self-Managed Retirement Benefits ? Self-employed people secure themselves for their retirements with the Keogh or the Simplified Employee Pension plans. Upon filing the Form 1040, the payments made for these plans could be shown for tax deductions.
(v)Home Offices ? Self-employed people who are running their businesses in their homes could claim home office tax deductions. These could be whole or part of the expenses incurred in the maintenance and upkeep of the home office. Even if the person conducts most of the business outside the home office and uses it only for simple chores like book keeping, its expenses could be claimed for tax deduction.
Both Art Gib & Adam J. Heist are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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