IRS Mileage Log Rules

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Question: 80,000 business miles a year?

At the tax office we had a woman whose husband is a courier and drives 80,000 miles a year.
We told her that she needs to bring the mileage log so we can see it.

Question 1: Is there an upper limit to mileage, if the amount dedicted exceeds the entire price of the vehicle and gas.
The customer told us that her husband has been posting a loss for about the five previous years.

Question 2 Can someone tell me the section number of the tax code or the IRS ruling that limits business losses to three years?

Answer: when the mileage method results in an unreasonable result, the IRS will disallow it and require that the vehicle be depreciated and the actual cash costs method be used otherwise. proving depreciation amounts beyond the normally required 5 year schedule is possible, and your client will need to have evidence from the prior cars he’s owned and run into the ground for a shorter life.

you’ll find the citation to the three year rule in the instructions — look for something like hobby losses. after you correct his auto expenses, however, he may not have a loss at all.

if so, you have an ethical question to ask — what do you advise your client to do about the prior years’ taxes which were apparently filed wrongly?

don’t forget schedule SE if schedule C shows a profit.

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Mileage-Log.mp4


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