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Schedule C CPA Discusses 2014 Business Standard Mileage Expense Method, Actual Expense Method and Documentation | SMLLC

Schedule C CPA discusses business mileage expense

Gary Bode CPA: the IRS expects you to keep a current mileage log. (910) 399-2705.

Schedule C CPAs always deal with business auto expense for Sole Proprietors and SMLLCs (Single Member LLCs). Business mileage is often the largest Schedule C expense. I’ll discuss the both the standard mileage method and the actual expense method for deducting auto expense on Schedule C, Profit or Loss From Business (Sole Proprietorship). To fill in any details, call your Schedule C CPA or review the record keeping part of IRS Publication 463. The Schedule C instructions might help. If you don’t already have a Schedule C CPA, consider calling us for a free phone consult. What’s the Auto Expense Deduction worth on your 2014 Schedule C? Let’s say your company has $5,000 of legitimate auto expense in 2014 for Schedule C. In this example it doesn’t matter if it used the standard mileage or actual expense method. Let’s also say the owner’s or Member’s personal marginal tax rate is 30%.

  • The $5,000 deduction on Schedule C saves paying income tax of $1,500 (30% x $5,000).
  • It also saves self employment tax on $5,000 of profit. Let’s say 15% to make the math easy. So that’s another $750 tax savings.
  • Total tax savings on the 2014 Schedule C is $2,250.

The IRS states you can’t deduct mileage that is approximated or estimated on Schedule C The days of just pulling a business mileage figure out of the air for Schedule C are gone. The IRS made a point of this by refusing to allow any business mileage deduction when they audited a return that included undocumented “round” business mileage figures. So, despite the fact that there was obviously some business mileage for the year, no business auto expense was allowed. Ouch. Remember Schedule C is the most audited type of business tax return. Keep a good mileage log. Back it up with odometer readings from your oil change receipts. Assume the IRS will look at your log. Up to the date of this post I’ve only had one client get audited. What did the IRS want? His mileage log. “One might expect folks to over-estimate mileage when records aren’t kept.  But my experience is the opposite.  Folks are conservative and lose badly needed deductions by under-estimating auto expense. Keeping records is not only required, it generally increases deductions.”  – Gary Bode, Schedule C CPA Standard Mileage Method You keep a mileage log tracking legitimate business mileage. For 2014 just multiply that business mileage by 56 cents. When you use the standard mileage method on Schedule C you can’t deduct any other type of vehicle expense except parking fees and tolls. The standard mileage method is all-inclusive. For example, if you put new tires on the car you can’t claim that expense on your 2014 Schedule C as it’s already included in the standard mileage rate. “Carefully structuring your business mileage could mean 100% of the mileage is business related, for Schedule C filers, because they usually have no commuting mileage.” – Gary Bode, Schedule C CPA Actual Expense Method Keep track of all auto expense e.g. gas, tires, oil changes, repairs, insurance. But you still have track your personal mileage, multiply it by 56 cents per mile and subtract that personal mileage amount from the actual expenses. What’ s the best method, standard mileage or actual expense method?

  • The standard mileage method is the easiest to administer. Just track your mileage.
  • With 2014 gas prices, the actual expense method usually generates the biggest auto expense deduction on Schedule C.

As always, if you’d like a free consult on Schedule C tax preparation, please give us a call at (910) 399-2705. We have a virtual office to serve your business tax needs wherever you live.

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3 comments to Schedule C CPA Discusses 2014 Business Standard Mileage Expense Method, Actual Expense Method and Documentation | SMLLC

  • health food store

    I really liked your articles. You seem to have really researched the topic well and mastered it. Nice job!

  • Lindsay

    When filing an amended schedule C, and if actual expenses were calculated, can you then on the amendment use mileage?

    • OK Lindsay, the answer is yes if you’re amending the company’s first Schedule C. But once you start to use the actual expense or mileage methods you must continue using them as long as the company uses that vehicle.

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