Tax Tips

Tax Tips

1Do you like to share? If you use an online platform to provide car rides, rent a spare room or furnish other goods or services, you’re involved in the so called, “sharing economy.” The IRS has recently posted valuable information about tax issues for these folks, as well as guidance for tax practitioners representing them on the IRS’s website at:

2Periodically review pension plan beneficiaries: You should review on an annual basis the primary and contingent beneficiaries for your qualified retirement plan and IRA. Changing your will will NOT change your pension and IRA plan beneficiaries. These have to be addressed separately. Thus, if you have any major changes in your life such as birth of a new child, death, marriage or divorce, you might want to address these changes with your pension and IRA plans.

3A recent case didn’t allow vehicle deductions due to bad mileage tracking. As many of you know by reading my posts, you MUST keep a mileage log if you want to get and keep any deductions for the business use of your vehicle. A taxpayer tried to do this by keeping a mileage log. Sadly, this was the wrong log to use since it didn’t always provide an explanation for each trip.

When audited, the taxpayer found out that his log wasn’t compliant so he backdated the needed information for the audit using his appointment book to back date the missing items. Unfortunately, the Tax Court didn’t allow this, and his vehicle deductions were disallowed.

I can’t emphasize this enough: A good mileage tracker MUST require you to post the reason for each trip along with the date, mileage, route (preferably by showing a map of your route) near or at the time of your trip. The taxpayer’s tracker did provide the date and mileage and a notation as to what mileage was personal vs business, but it did NOT require a business explanation for each trip. Failing to input any of these requirements will mean that you are NOT compliant. This is one good reason why everyone should consider using a very compliant tracker such as Taxbot.

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