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How do you file your income tax

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Discussion Starter · #1 · (Edited)
Hi,

My name is Deen Saleh, and I'm a CPA. I also drive both uber and Lyft when tax season is over.

I would love to answer your tax questions here for FREE.

Disclaimer Note: my replys are not to be used as a legal advise. I disclaim any and all legal liability that might arise as a result of using my answers.
 

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Questions:
How much depreciation Can I claim on my car?
What constitutes as an "expense"? or how much (considering Uber will issue a 1099 with an income to me)
 

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Discussion Starter · #3 ·
For tax purposes, there are two ways to calculate car expenses, for each car, you have to chose one method and stick to it, you are not allowed to switch methods in subsequent years.

Method 1: IRS Standard millage rate.

For 2015, it's 57.5 cents per mile. This method requires you to maintain a log of the business use of the car. If your car is 100 percent business, then use all millage driven. Other ways to estimate millage driven is acceptable, such as oil change records or dmv records.

If you use the standard millage method, you are not allowed to use any other car maintenance expenses, which means, no Gas, No depreciation, and no mechanics or other car related expenses allowed.

However, the following are some example of expenses allowed regardless of the method used

Car registration and taxes, car washes, parking, tolls and traffic violation tickets or related legal fees. There are many other expenses that can be claimed for ride-sharing businessEs.

Method two: actual auto expenses

With this method, you can claim all the actual expenses that actually occurred during the year, including depreciation.

You will not be allowed to use the IRS standard millage rate in current or future years if you end up choosing this method.

Some drivers are eligible to a very large depreciation deduction on the first year they buy the car, however, on later years the depreciation would be a lot smaller than normal. Remember that total depreciation is the same over the life of the car, only the distribution of the depreciation change

I hope this answer help.

If you need further assistance, You can call me and leave a message on

(415) 843-1272 or (415) THE-1CPA

I will get back to you
 

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Hi Deen, if you can explain the taxes UBER drivers are responsible for as independent contractors and will need to report the 1099 income they receive when they file their federal and states taxes. I think there are a lot of new drivers out there that do not understand their tax liabilities when tax time rolls around and will be shocked to find out how much they owe uncle Sam and their states uncle Sam.
 

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For tax purposes, there are two ways to calculate car expenses, for each car, you have to chose one method and stick to it, you are not allowed to switch methods in subsequent years.

Method 1: IRS Standard millage rate.

For 2015, it's 57.5 cents per mile. This method requires you to maintain a log of the business use of the car. If your car is 100 percent business, then use all millage driven. Other ways to estimate millage driven is acceptable, such as oil change records or dmv records.

If you use the standard millage method, you are not allowed to use any other car maintenance expenses, which means, no Gas, No depreciation, and no mechanics or other car related expenses allowed.

However, the following are some example of expenses allowed regardless of the method used

Car registration and taxes, car washes, parking, tolls and traffic violation tickets or related legal fees. There are many other expenses that can be claimed for ride-sharing businessEs.

Method two: actual auto expenses

With this method, you can claim all the actual expenses that actually occurred during the year, including depreciation.

You will not be allowed to use the IRS standard millage rate in current or future years if you end up choosing this method.

Some drivers are eligible to a very large depreciation deduction on the first year they buy the car, however, on later years the depreciation would be a lot smaller than normal. Remember that total depreciation is the same over the life of the car, only the distribution of the depreciation change

I hope this answer help.

If you need further assistance, You can call me and leave a message on

(415) 843-1272 or (415) THE-1CPA

I will get back to you
This is actual wording from IRS publication:

"To use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use the standard mileage rate or actual expenses."

This is different from what you say:

"You will not be allowed to use the IRS standard millage rate in current or future years if you end up choosing this method."
 

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This is what DeenCPA said:

Method two: actual auto expenses

With this method, you can claim all the actual expenses that actually occurred during the year, including depreciation.

You will not be allowed to use the IRS standard millage rate in current or future years if you end up choosing this method.
 

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This is what DeenCPA said:

Method two: actual auto expenses

With this method, you can claim all the actual expenses that actually occurred during the year, including depreciation.

You will not be allowed to use the IRS standard millage rate in current or future years if you end up choosing this method.
Hello: Read it again!

Your problem is in the " or future years if you end up choosing this method." IRS says "Yes" you can in later years switch methods in the future years. You say "No."

Incorrect advice is worse than no advice!
 

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I beleive he is saying once you choose to use the actual expenses, you can't switch back to standard mileage. That is because once you start taking the depreciation, you are locked into claiming actual expenses. You can switch from mileage to expenses; but not the reverse.

Standard mileage rate not allowed. You cannot use the standard mileage rate if you:
 

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I car wash at a coin-op, takes tokens no reciept.(God bless you btw)...I do it daily vacum anyway...im screwed without reciepts?
 

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i would like to avoid an audit, they have been after me since i escalated something like 6 years ago. I could so a log book it would be honest and easy my routine is clockwork..but will it be accepted?
 

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i would like to avoid an audit, they have been after me since i escalated something like 6 years ago. I could so a log book it would be honest and easy my routine is clockwork..but will it be accepted?
If you are claiming the standard mileage rate, all maintenance expenses are included already and you shouldn't claim cleaning costs separately. If you are going down the actual expenses road, I think a logbook listing your non-receipt expenses with amount and date would be accepted.
 

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Eric Lien, please post the IRS source for that.

Thanks
You asked for it, now you have it. It is from IRS publication. (The language I quoted is almost at the end of Standard Mileage Rate discussion, before the Actual Expenses discussion. Note the words "Then, in later years.... or actual expenses."

Topic 510 - Business Use of Car
If you use your car in your job or business and you use it only for that purpose, you may deduct its entire cost of operation (subject to limits discussed later). However, if you use the car for both business and personal purposes, you may deduct only the cost of its business use.

You can generally figure the amount of your deductible car expense by using one of two methods: the standard mileage rate method or the actual expense method. If you qualify to use both methods, you may want to figure your deduction both ways before choosing a method to see which one gives you a larger deduction.

Standard Mileage Rate - For the current standard mileage rate, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses, or search standard mileage rates on IRS.gov. To use the standard mileage rate, you must own or lease the car and:

  • You must not operate five or more cars at the same time, as in a fleet operation,
  • You must not have claimed a depreciation deduction for the car using any method other than straight-line,
  • You must not have claimed a Section 179 deduction on the car,
  • You must not have claimed the special depreciation allowance on the car,
  • You must not have claimed actual expenses after 1997 for a car you lease, and
  • You cannot be a rural mail carrier who received a "qualified reimbursement."

To use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Then, in later years, you can choose to use the standard mileage rate or actual expenses.

For a car you lease, you must use the standard mileage rate method for the entire lease period (including renewals) if you choose the standard mileage rate.

Actual Expenses - To use the actual expense method, you must determine what it actually costs to operate the car for the portion of the overall use of the car that is business use. Include gas, oil, repairs, tires, insurance, registration fees, licenses, and depreciation (or lease payments) attributable to the portion of the total miles driven that are business miles.

Note: Other car expenses for parking fees and tolls attributable to business use are separately deductible, whether you use the standard mileage rate or actual expenses.

Depreciation
Generally, the Modified Accelerated Cost Recovery System (MACRS) is the only depreciation method that can be used by car owners to depreciate any car placed in service after 1986. However, if you used the standard mileage rate in the year you place the car in service and change to the actual expense method in a later year and before your car is fully depreciated, you must use straight-line depreciation over the estimated remaining useful life of the car. There are limits on how much depreciation you can deduct. For additional information on the depreciation limits, please refer to Topic 704. Publication 463, Travel, Entertainment, Gift, and Car Expenses, explains the depreciation limits and discusses special rules applicable to leased cars.

Recordkeeping
The law requires that you substantiate your expenses by adequate records or by sufficient evidence to support your own statement. For further information on recordkeeping, refer to Topic 305.

Employees
Accountable Plan -
If you are an employee whose deductible business expenses are fully reimbursed under an accountable plan, the reimbursements should not be included in your wages on your Form W-2 (PDF), Wage and Tax Statement, and you should not deduct the expenses.

Nonaccountable Plan - If your employer uses a nonaccountable plan to reimburse you for the expenses, the reimbursements are includable in your wages. Your employer will combine the amount of any reimbursement or other expense allowance paid to you under a nonaccountable plan with your wages, salary, or other compensation and report the total on your Form W-2. You may deduct employee business expenses as an itemized deduction. For a definition of accountable and nonaccountable plans, refer toPublication 463 and Topic 514.

Where to Deduct

  • Generally, if you are an employee who intends to deduct your car expenses including expenses that exceed reimbursement under an accountable plan, you must complete Form 2106 (PDF), Employee Business Expenses, or Form 2106-EZ (PDF),Unreimbursed Employee Business Expenses, and itemize your deductions on Form 1040, Schedule A (PDF), Itemized Deductions. Your employee expenses are subject to the 2% of adjusted gross income limit. Refer to Topic 508 for information on the 2% limit.
  • If you are self-employed, deduct car expenses on:

Additional Information
For more information, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses.

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If you use the standard millage method, you are not allowed to use any other car maintenance expenses, which means, no Gas, No depreciation, and no mechanics or other car related expenses allowed.

However, the following are some example of expenses allowed regardless of the method used

Car registration and taxes, car washes, parking, tolls and traffic violation tickets or related legal fees. There are many other expenses that can be claimed for ride-sharing businessEs
Is no one going to respond regarding writing a ticket off? Or am I reading it wrong?
 

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Is no one going to respond regarding writing a ticket off? Or am I reading it wrong?
Just want to clarify... tickets and fines are almost never deductible
 
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