Many time my clients will ask during their tax interview about deducting their auto or truck expense. When I ask if they have a log documenting the business use of the vehicle, most will say yes, and hand me a spreadsheet, a calendar, or some other record of their use of the vehicle. But I am still surprised at those who still show up without a clue as to what I am talking about. “Oh, I guess I use it about 90% of the time.” I sometimes turn and look over my shoulder at the ceiling. That’s where they are looking. They must keep some record up there.
For many years the IRS has required a auto log showing the business miles of a vehicle as well as any commuting, personal miles and the total miles for the year. While originally they required that the auto log be kept daily, they now accept a reconstructed auto log. The problem with a reconstructed log is it is prone to errors and omissions of some of the use. Although it takes some self-discipline, and resolve, once the habit is initiated, it will become a matter of routine. There are numerous computer programs that can help you to post your mileage on a daily basis. A spreadsheet may be utilized, or if you are old-school, as many of my clients are, a small calendar with the mileage written daily will work.
If you should find your self in a situation like the person above, trying to find your mileage on the ceiling of my office, you can always reconstruct using your invoices showing where you went and who you talked to or the stores that you shopped at. Use MapQuest or Google maps to look up the mileage from point to point, and write down in the logging system that you are going to be using for the coming year. You may miss some of the wandering around miles looking for a particular business. Yes, that wandering mileage, while wasted time, is still business time. If you can reconstruct 3-4 representative months that truly reflect the average months for the year, sometimes that may be annualized for a yearly log. It’s best to keep the log daily and if you want to deduct any of the vehicle you must have an auto log.
If you need help with suggestions for maintaining a contemporaneous auto log or ideas for reconstructing one please let me know.
My new book Can I Write Off My RV? is now published. In it I describe the difference in a domicile, a tax home and a home base; how and when to file multi-state tax returns and other areas important to the working RVer who wants to save taxes when filing their income tax returns.
A printed paperback copy of the book may be ordered by clicking http://www.createspace.com/4467541
An ebook version of the of the may be ordered by clicking here.
As a Workamper, will you be volunteering for some organization this summer? Some travel expenses may help lower your taxes if you itemize deductions when you file next year. Here are five tax tips the IRS wants you to know about travel while serving a charity.
1. You must volunteer to work for a qualified non-profit organization. Ask the charity about its tax-exempt status. Visit the web site “IRS.gov” and use the Select Check tool to see if the group is qualified.
2. You may be able to deduct unreimbursed travel expenses you pay while serving as a volunteer. You can’t deduct the value of your time or services, however.
3. The deduction qualifies only if there is no significant element of personal pleasure, recreation or vacation in the travel. However, the deduction will qualify even if you enjoy the trip. The volunteer work must be the main purpose of the trip. Be sure to write that in to your travel/work log. You do keep one don’t you?
4. You can deduct your travel expenses if your work is real and substantial throughout the trip. You can’t deduct expenses if you only have nominal duties or do not have any duties for significant parts of the trip.
5. Deductible travel expenses may include:
- Air, rail and bus transportation
- Car expenses
- Taxi fares or other transportation costs between the work site and your RV.
If you are not a full-timer, that is you have a home base for which you must duplicate your living expenses while you are “away-from-home”, you may also deduct:
- Lodging costs (if paid and not provided for you)
- The cost of meals
- And laundry and incidentals
If you have questions or want to discuss send me an email to george@RVTaxMaster.com or call me at 480-290-1310. I prefer an email. They’re easier to keep track of and gives me time to think of the response. I am happy to discuss short answer questions without charge. If we feel that the time and discussion will be indepth with a specific purpose in mind I will let you know if a billable situation might be necessary.
To learn more see Publication 526, Charitable Contributions. The booklet is available at IRS.gov or by calling 800-TAX-FORM (800-829-3676).
This year is almost half over and it’s time to start organizing your tax records, if you haven’t started already. If you are a Workamper you have most likely finished your Winter job and have headed North and started your Summer job by now. You should have received your final pay statement showing your year-to-date earnings and any taxes that were withheld (if you were an employee). Hopefully you have kept all of the pay stubs so you can total them all up to insure that the employer’s totals are correct. You will also want to match these numbers up with your W-2 when you receive it at the end of the year. Employers sometimes make mistakes in totaling your wages and/or taxes withheld. Sometimes unscrupulous employers will increase your earnings to more than what you actually earned and received, just so that they may take a larger tax deduction and to lower their own taxes.
If you are a “part-timer”, have a home base somewhere, and are entitled to deduct your “away-from-home” expenses, summarize those now while they’re fresh on your mind. You can find a wallet type organizer at any office supply store or at Wal-Mart, Target, etc; to keep your receipts by category, not by month; or list them on a columnar tablet or in an MS-Excel spreadsheet.
Whether you have a home base or not (a full-timer) you may be able to deduct your travel expenses from one job to the next. There are a strict set of rules that the worker must follow to be allowed this deduction, but most Workampers can meet these requirements with a little planning and documentation.
Listen to the Workamper Tax Pro Secrets on the “workamper.com” web site under the bookstore section if you are not familiar with some of these terms. There I go into great depth about the home base requirements and what may be deducted. I also discuss what are “travel expenses”, “away-from-home” expenses and the requirements for deducting these costs.
Establish a single place now to start accumulating these items and records. Stay consistent in storing them there so that at the end of the year you won’t be so frantic is getting your information gathered for the preparation of your tax return. It’s going to happen, so try to make it as painless as possible by getting ready now.
Good luck and keep your wheels rolling.
The words home base refer to a brick and/or stick home that you must leave periodically for work or business purposes. It allows the worker to deduct all of his duplicated expenses while he is “a way from home”. The term home base should not be confused with the term domicile, which is your state of residence. Nor should it be confused with the term tax home. Tax home is a term used by the Internal Revenue Service to indicate where your income is earned. It may be in your home town or state (domicile) or at your home base, but could be in another state if no work is performed at your home base or within your domicile state. If you need to travel to another state or location in the course of your work you may deduct not only the travel expenses to get there and back but also the housing and living costs that are duplicated while you are there: rent (campground fees, housing (pro-rated cost of your RV), utilities (elect., water and all hookups and propane), and vicinity travel while you are on the job. Sometimes even food and laundry may be deducted.
Some RVer’s have asked me about renting out their home base while they are out on the road. What effect does this have on their deductions? If the home is rented, then it is no longer considered a residence but rental property. The rental income and expenses are reported on Sch E Rental Activity. Since your housing and living expenses are now no longer being duplicated but being paid for by the tenant , they are no longer deductible as “away from home” work related expenses.
Which is best: deducting the “away from home” expenses or renting the house out? That is a very complex question and requires a lot of analysis as to other items on your Sch A Itemized Deductions. It also requires consideration of your long term desires for the house (eventual sale and subsequent capital gain / loss), care and condition of the house while you are away, and your skills as an absentee landlord.
If you have a home base and are thinking about renting it out, talk with your tax advisor about the consequences before you decide to make this move. Should you like to be a client of mine, you may send me an email requesting a consultation via phone. If you have ordered the DVD set Workamper Tax Pro Secrets from Workamper News’s web site, you are entitled to a 50% discount off of the hourly rate.
Email me at george@BusinessAndTaxPlanning.com.
Are you an independent contractor or an employee? Many of the Workamper or other seasonal positions are structured for employees. There are some for contractors, though. What is the difference?…. A great deal when it comes to tax time. For an employee, the employer sets the hours of duty, generally furnishes all the tools or equipment needed to accomplish the job, as well as all the materials and how the job is to be done. The employer, upon payment for these services withhold all taxes necessary: Federal / State income taxes, Social Security and Medicare taxes and disability insurance depending on in which state the work is performed. California comes to mind now as well as some others. The employer then issues you a W-2 during January of the following year.
An independent contractor however is a self-employed individual with their own business. The contractor will establish, with the “employing” business, an agreement to perform some duty, build a shed, install wiring, etc; for a set price or sometimes at an hourly rate. The contractor will give the business an invoice for the work done. The contractor furnishes his own tools and equipment to accomplish the job. The employing business will send the contractor a 1099-Misc for Non-Employee Compensation for the earnings. The employing business sometimes may withhold Federal income taxes but never Social Security / Medicare tax. This is where the danger comes in. These earnings are subject to Self-Employment tax and you are responsible for payment on your Individual 1040 tax return.
If you think that you are working as an employee but taxes (FICA & Med) are not being withheld, you may be in for a big surprise when you file your income tax return. Even though your earnings are not for you to owe any income tax (after Capital losses, Rental losses, Itemized or Standard Deduction and Personal Exemptions) you may still owe Self-Employment tax (think Soc. Sec. Tax). If you don’t have enough withheld from your “other jobs” or from a pension/IRA you may owe a large amount, with possible penalty if you have not made estimated payments.
If you find yourself in a Workamper job where the employer is not w/h taxes and is treating you as a contractor that’s fine if that is what you intend. If it isn’t and you think that you may be in trouble at the year’s end….send me an email. You may not be able to alter the situation but you could prepare now for April 2014.
Individual taxpayers seeking new jobs may incur a variety of expenses, including costs directly associated with moving to a new job location or those specifically related to the job search. Many of these expenses are deductible, but the rules are strict, and expenses must be carefully documented and substantiated. You may be able to take advantage of these deductions, if you plan carefully.
Any moving expenses you may incur, including expenses of traveling to the new location and transporting household goods and personal effects, are deductible so long as you meet certain requirements relating to when you begin work at the new position and how far the new job is from the old job and your old residence. The move must be over 50 miles away to your new job. These expenses are deductible even if you are seeking employment for the first time or in a completely new field. Also, qualified moving expenses reimbursed or paid by your employer are considered nontaxable fringe benefits.
You also may be able to deduct the expenses you incur in searching for a new job, including the costs of a headhunter or employment service, and the expense of preparing your resume. These expenses are deductible so long as the job being sought is in the same line of work as the old job, even if you are unemployed at the time of the job search. Further, the job search does not have to be successful in order to qualify for the deduction. However, job hunting expenses for a first job, or related to changing to a new career, are not deductible.
Although these are just a few examples, there are many more tax issues that you should consider. We would like to meet with you to discuss your overall tax planning strategies and how you can benefit from these deductions. Please send me an email at your earliest convenience to make a telephone appointment.
I have just returned from Heber Springs, AR and the April 2012 Workamper Rendezvous. It was a week long session of classes and seminars, lunches and dinners for the experienced Workamper and for the Workamper dreamer: RV maintenance, RV safety and security, RV driving techniques, resumes tailored for the seasonal RV’er and my gerere, filing multiple state returns and duductions that may – or may not- be available to the RV’er. They were all absorbant minds open to knowledge and education and eager to learn. While very experienced both as a RV’er and as a Workamper, myself, I enjoyed watching and participating in the networking with everyone on techniques and skills. Steve Anderson, Chief Dreamer of the Workamper organinzation, is laying the foundation for a close knit family who enjoy meeting and sharing with one another their background and experiences.
As I visited with the attendees, I was amazed at the confusion and lack of knowledge that people have about our tax laws and how it pertains to them. I guess it demonstrates how complex and complicated our tax laws have grown. For some, because their income is purposefully or by circumstances limited, the tax laws do have little impact on their lives. Other’s, even though way short of the upper 1% (try the upper 75%); knowing what Uncle Sam will do to them taxwise, and planning to minimize that impact, can be as important as getting a 25% raise.
The tax season rush is over for me, for now, and I can get back to writing again on this blog. I’ll go back to writing about my experiences and some tax comments and tips.
The regular tax filing season for the 2011 1040 individual return is about over. The deadline is next Tuesday April 17th. The deadline is usually at midnight on April 15th. When ever the deadline falls on a weekend (Sunday this year) however, the deadline is moved to the next business day. Normally that would be Monday, April 16th, BUT…that day is a holiday in Washington, D.C. That is Emancipation Day, the day in 1862 that President Abraham Lincoln signed the Emancipation Act which freed the slaves in the United States. So, we get an additional day to suffer. Unless you have already filed your return. In that case you may set back and watch with amusement as those who have not filed yet struggle through the weekend. But, please don’t wait until Tuseday afternoon.
If you have not filed yet and would like help, you may contact me through this web site: george@RvTaxMaster.com or my other web site which is dedicated to all idividual and businesses: george@BusinessAndTaxPlanning.com. It’s not too late!
What Every RVer Should Know About Taxes
Because we, as a nation and as a collection of individual states, have such a complex structure of taxation whether levied on income, sales, or property, it would be prudent for each RVer to understand as much as they can about the areas that would affect them. Every RVer, in fact every citizen, should know, at least, the basics about tax so that they may plan their life accordingly. Judge Learned Hand, US Court of Appeals – 1927-1961, once wrote:
“Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.
Commissioner v. Newman, 159 F.2d 848, 851 (2d Cir. 1947) – dissenting opinion
Because we, as RVer’s, travel in, live in, and work in more states and more situations than the average Joe (or Mary) we become subject to more issues than others, either by design or inadvertently. There is a lot of misinformation being spread about what can and cannot be deducted or of particular entities such as corporations, trusts or limited liability companies (LLC). Because of both being un-informed of the various tax laws or because of some attorney or accountant’s desire to “sell” their services for incorporation, trust formations or other legal products, some folks get involved with situations that merely complicate their lives and increase their compliance costs (filing extra returns) so much that they wipe out any tax saving that the corporation, trust or LLC was to save them in the first place.
My goal with this blog is to explain some of the tax laws, mostly on the Federal level, some on the state level where applicable, so that you, the RVer, whether a full-timer or a part-timer will know what you may deduct as to travel expenses, transportation expenses and other business expenses and how to determine how much you will save in taxes and whether it is worth your while to track and deduct these expenses.
I don’t intend to make tax preparers of you, but, I think you should know at least the basics.