Small Business

How do I get a mileage deduction?

Mileage deductions can be difficult to understand when you’re recording your business expenses, but we can make it simple for you.

Actual Vs. Standard Mileage

In order to take any kind of deduction, the taxpayer is required to keep a written log of all miles driven and record how many were driven for business use and how many were driven for personal use. There are two options: actual auto expenses or the standard mileage deduction.

Since the standard mileage deduction is based on an average, in a large percentage of cases, using the mileage deduction produces a larger auto expense deduction than actual expenses. In order to use standard mileage, it must be used the first year the vehicle is placed in service.  After the first year, taxpayers can decide to use whichever method (actual or standard mileage) that has the highest amount of expense.

(Note: If the vehicle is leased, you must choose either standard or actual for the entire life of the lease.)

To get the actual auto expense deduction, the taxpayer must keep track of all maintenance, repairs, fuel, tires, insurance, registration fees, licenses, etc. and determine how much of that is attributable to the portion of the total miles driven that are business miles.

IRS 2014 Mileage Rates:

  • 56 cents per mile for business miles driven
  • 23.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

IRS 2015 Mileage Rates:

  • 57.6 cents per mile for business miles driven
  • 23 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

To take advantage of this deduction; a taxpayer must keep track of:

  • All business miles driven for the year (in written form)
  • Total miles driven for the year (in written form)

When can you NOT use the standard mileage rate?

  • For commuting miles, which are the miles going from home to work and vice versa
  • If your car is for hire, for instance a taxi cab
  • If you use five or more cars at the same time for business, for instance a fleet operation
  • If you have already counted the depreciation of the vehicle as a deduction or allowance

Note: Parking fees and tolls for the business are separately deductible, regardless of which deduction method is used.

Tax Break Extensions for 2014 Returns

At the end of 2014, the Senate approved HR 5771, or The Tax Increase Prevention Act of 2014, which passed by a landslide in the House early last month on December 3rd. This bill extended expiring tax provisions from the end of 2013 and 2014 for individuals and businesses whom Sweeten CPA service, so we wanted to keep our clients informed about what this means, specifically about which provisions are being extended:

  • The threshold under Section 179 has been increased to its previous threshold of $500,000, from its diminished threshold of $25,000, allowing for the expensing of qualified asset purchases rather than the spreading out of those expenses over time through regular depreciation.
  • Energy efficient renovations to your home, like more effective doors and windows for your home, are back under the previous rules with a 10% credit of the cost of the improvements, with a lifetime limit of $500.
  • Energy efficient renovations to commercial property, like replacing existing energy systems with high efficiency systems, are back under the previous rules with a possible deduction of up to $1.80 per square foot.
  • Other improvements, made to leased buildings, restaurant property, and retail establishments, are also back under the previous depreciation rule involving a 15 year straight-line depreciation method.
  • For seniors, seventy and a half years or older, 2014 distributions from your IRA to charity are tax-free.
  • Teachers can again claim above-the-line deductions of up to $250 for books and materials used in the classroom purchased out-of-pocket.
  • Tuition-payers can again claim above-the-line deductions of up to $4,000 for higher education expenses.
  •  Cost of new property purchased or used in 2014 can be expensed by 50%, using the Special Depreciation rule.

Enjoy these extensions and if you’re confused, don’t worry: Sweeten CPA can manage these changes in your tax return this year!

Should I do my company’s payroll?

Payroll Time!Congratulations! Your new business venture is doing well and it’s time to start paying yourself a salary and possibly even hire an employee. You ask yourself, “I wonder if I can just do the payroll myself?”

Or let’s say times require belt-tightening in your company’s budget. To save money, you consider ditching your payroll service in favor of tackling it yourself “for free.”

What is our recommendation?

Unless you were previously a payroll accountant and have extra time on your hands, then we would urge small business owners not to take on payroll themselves. We have the utmost confidence in the competence of good small business owners, but if payroll is not your core business, the cost/benefit ratio will almost always be in favor of hiring out this pesky task to professionals. Continue reading…

"How do I read my company's financial reports?" Presenting The Dashboard!

Still as true as it was when presented to us in formative days by SchoolHouse Rock: “Knowledge is power!”

But what if you can’t understand those scary, long reports full of numbers called financial statements? Income Statements, Profit and Loss, and Statement of Operations (hint: they’re all the same thing) reports? And don’t even get us started on the Balance Sheet! Ugh! Numbers are not your thing, right? That is what your accountant is for. However, even with an accountant or software generating perfectly accurate financial reports, they are just a lot of stale numbers if you don’t know how to dig in to them!

We at Sweeten CPA have developed a system to bridge the chasm between financial reports and key conclusions they can provide. We call it “The Dashboard.” (Think of all the key indicators on the dashboard of your vehicle that help you drive correctly.) When we provide your company with its own personalized Dashboard, one of our CPAs will sit and consult with you as as your honorary CFO. The CPA will point out and explain the measurements and ratios that mean the most for your business and industry, and exactly what they mean for your company.  Some of these metrics will come from the data available in your accounting software or financial reports; some of it may come from outside sources.

Want proof that The Dashboard can benefit your company? Continue reading…

Stay-at-home parent? You need retirement savings, too!

stay-at-home-momThere are over 5 million stay-at-home parents in the United States.  We give these individuals snaps for forgoing earnings (at least for a time) to make sacrifices that are important to them! However, these people are not exempt from aging, and therefore need to be concerned about a retirement nest egg.

Are you a stay at home parent? Have you thought about saving the money you will need for your retirement? Be careful not to assume your partner has it all taken care of–he/she may not! Here are some practical ways to save, suited specifically for your unique situation. Continue reading…

"I'm self employed. How do I get health insurance with the new health care laws?"

(insurance_help_deskTake a second to laugh heartily at the picture and then let’s get to business.)

The health insurance world has been turned on its head courtesy of the Affordable Care Act, and reality has yet to settle in. But in the mean time I have felt anxious for all our self-employed friends, and I dedicate this blog post to you. May it be of help to you in your quest to find health insurance, now a legal requirement. Continue reading…

Techflex: Easy ways technology can save your small business time and money now

What POS system?The Golden Age of Technology (as I like to coin it) has been amazing to experience!  It has also been overwhelming at times given the super-sonic speed at which new technology arrives on the scene.  It can be tempting to bury your head and hope it will all be over soon.  But resist! If you are a small business owner there are many fabulous, easy to use, affordable and practical technologies out there just waiting to save you time and money.  (And don’t worry, we won’t try to fill a bucket with a fire hose.) Continue reading…

"So you're an expat? What's that?" Tax implications of living and working abroad

An expatriate–or expat for short– is just fancy lingo for someone who is living in a different country than their upbringing. And while the idea of being an expat is thrilling for some (What? Living and working in Paris, London or Tokyo?  Yes, please!) it will almost always mark the beginning of needing a legit CPA to help with your taxes. Why? Because United States citizens pay taxes on worldwide earned income. What does that mean? It means that Uncle Sam gets his share even if you live, work, earn money, and pay taxes on that money in a different country. The waters of expat taxes can get murky with complexity, so for now let’s just get our toes wet (a.k.a., seek further competent help if you are going to take the plunge). Continue reading…