NEUBAUER & NEUBAUER FINANCIAL SERVICES

J.K. Lasser’s Tax Tips

NEUBAUER & NEUBAUER FINANCIAL SERVICES

Published by John Wiley & Sons, Inc., Hoboken, NJ

Records Needed To Use Standard Mileage Rate (November 2007)

                 The IRS standard mileage rate (48.5 cents per mile for 2007) allows you to claim a deduction for car or truck expenses on business trips without regard to actual vehicle operating costs. However, the allowance does not do away with the need to keep records. In addition to keeping track of your mileage, you must also have records documenting the business purpose of the trips if the IRS questions your deduction.

                 For example, Robert Walters, who owned a home remodeling business, could not use the standard mileage rate for most of his 2002 truck expenses because he lacked supporting records. He had claimed a $10,878 deduction, based on the standard mileage rate of 36.5 cents per mile for 29,803 business miles. When the IRS audited his return, Walters presented job worksheets, which substantiated 2,683 miles driven to and from various job sites, indicating the date of each trip, job site location, work performed, and names of employees on the job. However, the other 27,120 miles were entered in a truck log that did not identify the places to which Walters drove or the business purpose of the trips.

                 The IRS conceded that the job worksheets met the substantiation requirements, but not the truck log. The Tax Court agreed. Walters was entitled to a standard mileage rate deduction for only the miles shown on the job worksheets.

Your Income Tax, 43.1

Robert Thomas Walters, TC Summary Opinion 2007-167

 

No Changes in IRS Interest Rates on Underpayments and Overpayments (October 2007)

                 Taxpayers who underpay their taxes owe an interest rate set by the IRS that can be adjusted quarterly. Taxpayers who overpay their taxes can receive interest on their refunds. The IRS has announced that its rates for the fourth quarter of 2007 remain unchanged at 8% for underpayments and overpayments of individuals. This is the same rate that has been in effect since July 1, 2006.

                 The rate on corporate overpayments is 7% (5.5% for the portion of the corporate overpayment exceeding $10,000). The rate on corporate underpayments generally is 8%, the same rate for individuals. However, the rate for large corporate underpayments is 10%. Large corporate underpayments are underpayments by a C corporation exceeding $100,000.

Your Income Tax, 46.8, 47.6

Revenue Ruling 2007-56, 2007-39 IRB 668

News Release IR-2007-154