Own Authority and a Leased Operator

[dhalltoyo]

Frank,

Many carriers permit Lease Owner/Operators to also have their own authority.

I thought that I read a post indicating that having reportable income from both of these sources during a tax year would somehow generate a closer scrutiny by the IRS.

Any thoughts?

 

[Fkatz]

Frank,

Many carriers permit Lease Owner/Operators to also have their own authority.

I thought that I read a post indicating that having reportable income from both of these sources during a tax year would somehow generate a closer scrutiny by the IRS.

Any thoughts?
***************
There is a possibility of the Audit in reference but since both incomes would only generate to 1 Sch C, Business Profit and loss form

it is not anymore looked at then any others

Frank

 

[dhalltoyo]

Terry,

If they go off lease then they cannot take the standard mileage rate and be protected.

If the carrier that they are lease with pays them after they take the load under there insurance then it would be considered mileage rate, but if they recieved a separate 1099 from the broker using there own authority, they might be RED FLAGED FOR A DENFINTE AUDIT.

Frank,

This is the post I was thinking about. Are you saying that if I have my own authority and I am also leased to a carrier and I receive income from both sources, that I can not take the mileage deduction?

 

[rickd]

I agree with fkatz, nothing here would flag an audit. Actually, the standard mileage rate is for use of a personal vehicle in company business. A commercial vehicle is depreciated as equipment according to the depreciation rules for the particular year (they change every year). Then you deduct actual expenses for fuel, repairs, and maintenance. The only standard deduction that you are allowed in this business is the $52 per diem for meals, entertainment, and incidentals under the special rule for transportation workers. The $52 per day deduction is then reduced to 80% but increases to 100% in the next couple of years.

 

[dhalltoyo]

OK, my van is my personal vehicle and I use it in a commercial application. So, you are indicating that I can not opt to take the standard mileage deduction and I must use the depreciation method?

 

[Crazynuff]

According to this IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile vehicles used for hire may not use the mileage deduction . More info is available form links at that page .

 

[greg334]

According to this IRS Announces 2008 Standard Mileage Rates; Rate for Business Miles Set at 50.5 Cents per Mile vehicles used for hire may not use the mileage deduction . More info is available form links at that page .

You can't claim it as a personal vehicle if it is used for commercial purposes. You have to keep track of personal mileage and subtract that from the mileage you accumulate during the year. - this is directly from the IRS.

 

[Crazynuff]

Correct Greg . I was one of several supervisors for a company that had us take assigned pickups home . Personal use of vehicle was noted on my pay stubs and tax deducted . At the end of the year we had to fill out a form breaking down mileage for business , personal , and commuting . We were warned anyone not returning the form would have all mileage reported to the IRS as personal use .
I've known RV haulers that insist they can take their signs off and log off duty when deadheading . When I mention off duty driving is private use and ask if that's how they show it on tax returns they get a little upset .

 

[dhalltoyo]

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS), after claiming a Section 179 deduction for that vehicle, for any vehicle used for hire or for more than four vehicles used simultaneously.

Crazynuff,

Thank you for the link. If I am reading it correctly, as long as I start with the standard mileage deduction, and stay with that method, I can use it to calculate my operating expenses.

 

[pjjjjj]

Not sure if this is the info you are looking for, but check out: http://www.irs.gov/pub/irs-pdf/p463.pdf
'Travel, Entertainment, Gift and Car Expenses'
It elaborates on the definition of 'Car' on page 17.
-must not be over 6000lb gvw
-does not include: a vehicle used directly in the business of transporting persons or property for pay or hire, or a truck or van that is a qualified nonpersonal use vehicle
It goes on to say what a qualified nonpersonal use vehicle is defined as.

 

[dhalltoyo]

Standard mileage rate​

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. The term "standard mileage rate" means the applicable amount provided by the Service for optional use by employees or self-employed individuals in computing the deductible costs of operating automobiles (including vans, pickups, or panel trucks) they own or lease for business purposes, or by taxpayers in computing the deductible costs of operating automobiles for charitable, medical, or moving expense purposes.
​

​

Transportation expenses. The term "transportation expenses" means the expenses of operating an automobile (including vans, pickups, or panel trucks) for local travel or transportation away from home.
​

SECTION 5. BUSINESS STANDARD MILEAGE RATE

.01​

In general. The standard mileage rate for transportation expenses is 50.5 cents per mile for all miles of use for business purposes.

.02 Use of the business standard mileage rate. A taxpayer may use the business standard mileage rate with respect to an automobile that is either owned or leased by the taxpayer. A taxpayer generally may deduct an amount equal to either the business standard mileage rate times the number of business miles traveled or the actual costs (both fixed and variable) paid or incurred by the taxpayer that are allocable to traveling those business miles.

.03 Business standard mileage rate in lieu of fixed and variable costs. A deduction using the business standard mileage rate is computed on a yearly basis and is in lieu of all fixed and variable costs of the automobile allocable to business purposes (except as provided in section 9.06 of this revenue procedure). Items such as depreciation (or lease payments), maintenance and repairs, tires, gasoline (including all taxes thereon), oil, insurance, and license and registration fees are included in fixed andvvariable costs for this purpose.

.04 Parking fees, tolls, interest, and taxes. Parking fees and tolls attributable to use of the automobile for business purposes may be deducted as separate items. Likewise, interest relating to the purchase of the automobile as well as state and local personal property taxes may be deducted as separate items, but only to the extent allowable under § 163 or § 164, respectively.

Section 163(h)(2)(A) expressly provides that interest is nondeductible personal interest if it is paid or accrued on indebtedness properly allocable to the trade or business of performing services as an employee.

Section 164 expressly provides that state and local taxes that are paid or accrued by a taxpayer in connection with an acquisition or disposition of property are treated as part of the cost of the acquired property or as a reduction in the amount realized on the disposition of the property. If the automobile is operated less than 100 percent for business purposes, an allocation is required to determine the business and nonbusiness portion of the taxes and interest deduction allowable.

.05 Depreciation. For owned automobiles placed in service for business purposes, and for which the business standard mileage rate has been used for any year, depreciation is considered to have been allowed at the rate of 16 cents per mile for 2003 and 2004, 17 cents per mile for 2005 and 2006, 19 cents per mile for 2007, and 21 cents per mile for 2008 for those years in which the business standard mileage rate was used. If actual costs were used for one or more of those years, these rates do not apply to any year in which actual costs were used. The depreciation described above reduces the basis of the automobile (but not below zero) in determining adjusted basis as required by § 1016.

.06 Limitations.

(1) The business standard mileage rate may not be used to compute the deductible expenses of (a) automobiles used for hire, such as taxicabs, or (b) five or more automobiles owned or leased by a taxpayer and used simultaneously (such as in fleet operations).​

(2) The business standard mileage rate may not be used to compute the deductible business expenses of an automobile leased by a taxpayer unless the taxpayer uses either the business standard mileage rate or a fixed and variable rate allowance (FAVR allowance) (as provided in section 8 of this revenue procedure) to compute the deductible business expenses of the automobile for the entire lease period (including renewals). For a lease commencing on or before December 31, 1997, the "entire lease period" means the portion of the lease period (including renewals) remaining after that date.​

Vans.​

​

​

​

A van with a loaded gross vehicle weight of 14,000 pounds or less is a qualified nonpersonal-use vehicle if it has been specially modified so it is not likely to be used more than minimally for personal purposes.

For example, a van qualifies if it is clearly marked with permanently affixed decals, special painting, or other advertising associated with your trade, business, or function and has a seat for the driver only (or the driver and one other and either of the following items.​

•​

Permanent shelving that fills most of the cargo area. •

• An open cargo area and the van always carries merchandise, material, or equipment used in your trade, business or function​

 

[Fkatz]

Dave,

the answer to this is that the standard mileage rate would not be deductible at all. Then you become "FOR HIRE" with your own authority,

fRANK

 

[pjjjjj]

Aren't you considered 'for hire' even if you, as an owner-operator, are leased on with a carrier?
Wouldn't the mileage rate only be deductible as an expense if you used your own vehicle as an employee in the course of doing business for your employer?
And isn't there something about it having to be your 'personal' vehicle, as opposed to a 'commercial' vehicle?
pjjjjj <===== confused

 

[Fkatz]

Aren't you considered 'for hire' even if you, as an owner-operator, are leased on with a carrier?
Wouldn't the mileage rate only be deductible as an expense if you used your own vehicle as an employee in the course of doing business for your employer?
And isn't there something about it having to be your 'personal' vehicle, as opposed to a 'commercial' vehicle?
pjjjjj <===== confused

HI All,

Drivers of Cargo Vans have used the standard mileage rate for years, and 95-98% have not been audited due to this deduction. What it boils down to is to Most of you Owners out there have in there Leases stating that the Company (leasing company) has EXCLUSIVE USE of your vehicle and they tell you where, what and when has to be picked up and delivered.

In November of 1997, A Cheif Council Memo was Issued pertaining to the Standard Mileage Deduction, CCM#1997-40 and it could not be disallowed based on what was stated in the Lease.Since a lot of drivers do not have another form of vehicle, it is also considered there persona vehicle. I will have a copy available at the Expo for you to have, I have tried to copy and paste it into e-mails but it has not worked yet.

Of the 2-5% of the drivers that were audited for this deduction, the standard mileage rate was allowed.

Frank

Circular 230 Disclaimer - Any tax advice in this communication (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax related penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any transaction or tax-related matters addressed herein.