Discussion:Tractor mileage
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Discussion Forum Index --> Tax Questions --> Tractor mileage
| 3 May 2008 | |
| Schedule C Client owns 3 tractors and 10 trailers which she uses to pick up and deliver merchandise that she purchase for resale in her own business. Can she use the standard mileage rate.
Would your answer be different is the tractor and trailer were owned by an S-Corp. | |
| 3 May 2008 | |
| My question to you is: Why would you want to use a mileage rate? The cost of operating a tractor-trailer is WAY more than 50½¢/mile.
Next, why hasn't this person already incorporated? That would have been my first step. | |
| 3 May 2008 | |
| Understood but this is a new client. 2005 return is being audited for business expenses and he has no receipts for disel and stated that all disel was purchased with cash. He has form a corp in 2008. He can reasonably reconstruct the miles since he purchased trailers in 2005. If using actual expenses might not be very convincing without any written docs. He keeps a very good log of things he purchased and sold when and where. | |
RoyDaleOne (talk|edits) said: | 3 May 2008 |
| The trailers are not "motorized vehicle" and should be depreciated, no standard mileage is available for them.
There is a limit on the number of vehicles that can use the standard mileage on a Schedule C, I don't recall the number. I, also, believe that a S Corporation is not allowed to use the standard mileage rate for owned vehicles. When, the net profit say, is below a $100,000 per year, the benefits that can be derived from incorporation, aside from some liability protection, can not be worth the effort. Records are already a question with this client, and by that I mean records could more of a problem if he is incorporated. A SMLLC maybe the way to go. | |
| 5 May 2008 | |
| Agreed. Although I've seen a number of business persons who were poor recordkeepers suddenly get organized when encountering the "mystery" of corporations. When forced to maintain a GL, they can become easy (easier) to control. | |
Death&Taxes (talk|edits) said: | 5 May 2008 |
| You might look at Rev Proc 2007-70: 5 or more automobiles is the limit in one business when used simultaneously. And note that the Rev Proc continually uses the word, 'Automobiles.' | |
| 5 May 2008 | |
| Ask your client if he is using red diesel in his trucks. Red diesel is for off-road use. Federal taxes are not charged on red diesel making it much cheaper to purchase. A receipt for the purchase of red diesel would probably say "red diesel". This would explain the cash purchase and no receipt response. There are significant penalties for using red diesel in over-the-road vehicles/tractors.
In any event you can use fuel tax reports and driver log books (if any of these exist)to create reports for actual expenses. I would be meticulous and have them ready when the RA asks about fuel costs. Hopefully the red diesel question never comes up. | |
| 6 May 2008 | |
| I know of a case in which a landscaping company that was running 6 trucks on red diesel was audited by the Illinois DOR. They came in around 5:00 am one day, did a quick check of the fuel tanks in each truck and instantly assessed the owner $20,000 per truck. They padlocked the gate and told him that when he had certified funds for $120,000 they would open the gate.
Interesting part of the story is that the owner probably still made out like the bandit he is because that it's likely only a fraction of the taxes he stiffed the state on. | |
