Posted by John Tennant on 3/6/12 12:37pm
Msg #414088

Tax Court decision on mileage logbook's

Every year there is a discussion on business use of a car. For those whom are new to Notary work, a log book is required. If you get audited by the IRS it is your proof of the right to the deduction.

Following is a recent decision by the Tax Court.

From the Kiplinger Tax Letter dated March 2, 2012

“An unreliable logbook can cost a deduction for the business use of a car.

A couple who used their vehicles in their sole proprietorships found this out the hard way. Their logbooks were riddled with mistakes, questionable entries, and other irregularities…so much so that the Tax Court was unable to rely on them. As a result the Court upheld IRS’ disallowance of ALL mileage expenses for the vehicles, even though they were used partially for business (Moore, TC Summ. Op. 2012-16).

In addition, both home office deductions and business use mileage deductions are considered in the top 10
“red flags” for the IRS.

For reference to what is allowed you can log on to IRS.gov. In the search bar, enter Pub 463, or Pub 587. These publications will give you everything you need to know to avoid an IRS audit in relation to these “red flags”.

Hope this helps answer those questions to the new Notary Rotary members.

Reply by ME/NJ on 3/6/12 12:54pm
Msg #414089

Been saying it for years.. That is what kicked my first audit off. I would rather eat the cost now instead of triggering off another audit. Been audit for 4 years going back 2004. Thank god they stopped when I dropped itemized business stuff.

The only way I would go back is if I rented out a office space and put myself on a payroll.

Reply by Stephanie Santiago on 3/6/12 1:42pm
Msg #414093

I'm not new John, but thank you for the info. n/m

Reply by Karla/OR on 3/6/12 5:35pm
Msg #414120

<<Been saying it for years.. That is what kicked my first audit off. I would rather eat the cost now instead of triggering off another audit. Been audit for 4 years going back 2004. Thank god they stopped when I dropped itemized business stuff.>>

Would it help to post a question regarding this topic to see how many are audited that itemize thier business stuff??? This is my first year filing for my business. If I saw enough people posting that WERE in fact audited, it would be something to consider for sure.

Reply by CopperheadVA on 3/6/12 5:50pm
Msg #414121

I have been doing notary loan signings since 2005. I have never been audited, however I have also claimed a significant profit each year in relation to the expenses that I deducted. I do keep track of my mileage on a spreadsheet with beginning and ending mileage for each trip, and record the borrower name and address that I traveled to in addition to trips for dropping docs at shipping locations. I don't think that a Mapquest printout will cut it, but that's what some people use for their mileage record.

Reply by Karla/OR on 3/6/12 5:54pm
Msg #414122

Your post was encouraging COPPERHEAD.

This is my first year filing. with all my start-up costs, I doubt I will show a profit. Should I then be concerned about an audit?

Reply by CopperheadVA on 3/6/12 6:31pm
Msg #414126

Re: Your post was encouraging COPPERHEAD.

I couldn't tell you. But I have read on this forum that if you show several years of losses, the IRS considers your business a hobby and disallows the deductions. I am not a tax person so please don't rely on my info for tax advice. There are several notaries on this forum that are also tax professionals, so hopefully they will chime in.

Reply by MW/VA on 3/6/12 7:22pm
Msg #414131

Claiming a loss won't increase your odds of an audit, IIMHO.

The IRS will only allow you to claim a loss for 3 years, however. After that, they consider it a hobby.

Reply by Clem/CA on 3/6/12 7:43pm
Msg #414138

Re: Your post was encouraging COPPERHEAD.

If you don't lie then you have no reason to be concerned

Reply by JanetK_CA on 3/7/12 1:51am
Msg #414151

Are you trying to decide whether or not to claim certain deductions? I hope that's what your dilemma is about and not whether or not to keep good records. The latter should be done regardless.

I was taught early on to log actual odometer readings, business purpose for the trip, who you met with and when. From John's post above, it sounds to me that this would be sufficient to back up your deductions in case of audit. I'm not the expert, either, but I've also heard that if you do get audited and can show good documentation, that you will be less likely to challenged on more issues. Like I said, just what I've heard, but it makes sense to me.

Reply by Karla/OR on 3/7/12 2:53am
Msg #414156

Yes, that is correct - my concerns were around deductions. I do keep excellent records of everything pertaining to my business. Thanks for the encouragement as well.

Reply by Karla/OR on 3/6/12 6:13pm
Msg #414124

John, thanks for the informative publications! n/m

Reply by MW/VA on 3/6/12 7:27pm
Msg #414133

Thanks for the info, John. In my experience, many

self-employed & small businesses get audited. The IRS doesn't have a way to know everything about us & our activity. While we can be audited at any time, it's more likely when we claim expenses that are high in proportion to the income.
Taxes are a sore subject for me right now. I'm taking a big hit for last year because of some unexpected money I received that is all taxable. Ughhhh.
I could really go into a rant right now, but I'd probably need to take it to "Just Politics". IMO, it is the IRS itself that needs to be audited. LOL

Reply by John Tennant on 3/6/12 10:32pm
Msg #414147

Re: Business v/s Hobby. n/m

Reply by John Tennant on 3/6/12 10:45pm
Msg #414148

Re: Business v/s Hobby.

Hit the button too soon.

The IRS will consider your business a hobby if you do not have a profit in 3 of the last 5 years, including the current year.

The IRS does audit these situations and can recoup all of the losses, therefore, collecting taxes on them.

Reply by ArtG/KS on 3/7/12 7:50am
Msg #414161

Re: Business v/s Hobby.

Only business miles per those aforementioned pubs are applicable for a deduction. I also print maps showing all stops for the day and keep the order forms to back up the logs in case of audit. That helps to prove validity in your entries into a log. I use a CPA for taxes who specializes in business returns.