Mileage

[BP.]

Got two mileage calls today. Both from regular clients whose job situations had changed. Neither liked my responses. The responses did not coincide with the tax "advice" received from others.

1. A W-2 employee works for an agency. She is assigned to various nearby (none more than 30 miles away) locations that may change day to day. Only one location is visited per day, directly from home. There is no mileage reimbursement from the employer. The employee leaves home, goes directly to the temporary job location, and comes home. She says her co-workers deduct mileage. I said no deduction under the scenario she described.

2. A person is getting a 1099-Misc for home health care. She sees only one client, 20 miles away. She goes from home, to the one client's location, then home again. The person who hired her says deduct mileage. I said no deduction under the scenario she described.

I'm referencing TTB p. 10-2. Would you deduct miles under either case? Thanks!

Barbara

PS- Aside to case 2- Client says her husband's lawyer told him to claim the kids he has with his ex, as "the law has changed and the kids live with both parents 50/50 and he pays support." Talk about undermining credibility.

Cheers!

[solomon]

Looks like your analysis corresponds with Rev. Rule 99-7.

[Gretel]

I agree with your conclusions in both cases. It's very frustrated that everyone else seems to know more about taxes than the tax professionals. One of my standard responses to "but he/she takes the deduction" is to ask if the tax returns have ever been audited and that one only knows after an audit.

[Nashville]

....and he's a LAWYER!!

...I hear this so much I'm sick of it. Ask if the lawyer will sign the return...if they really knew what we did, they would never do so.

Barbara, your first scenario is a grey area. I think a landmark case was where IRS claimed that the entire Philadelphia metropolitan area was the taxpayer's "tax home" and all trips were thus commuting trips. Not really fair -- metro Philly can be over 60 miles from one end to the other, and can hardly be described as "hospitable bucolic driving."

Taypayers fare better if they are not working in a metro environment. If this is the case, and client was driving 30 miles in any given direction, I would probably deduct the mileage.

Your second case would be a slam dunk for the IRS. Her tax home is the locale of this one patient, and all such driving is commuting. Ask if in her profession she is required to attend seminars, visit the payer's premises, or go shopping for supplies. This kind of stuff would be a legitimate mileage deduction, especially against a 1099 where there is no 2% floor.

[Gretel]

Taypayers fare better if they are not working in a metro environment. If this is the case, and client was driving 30 miles in any given direction, I would probably deduct the mileage.

I think it all depends. Where I live the next bigger town is 50 miles away and you bet, everyone going there is commuting. An auditor had established 70 miles as the breaking point to be deductible mileage. So it depends not only on which area you live in but also on the auditor.

[solomon]

From RR 99-7:

HOLDING
In general, daily transportation expenses incurred in going between a taxpayer’s residence and a work location are nondeductible commuting expenses. However, such expenses are deductible under the circumstances described in paragraph (1), (2), or(3) below.

(1) A taxpayer may deduct daily transportation expenses incurred in going
between the taxpayer’s residence and a temporary work location outside the
metropolitan area where the taxpayer lives and normally works. However, unless
paragraph (2) or (3) below applies, daily transportation expenses incurred in going
between the taxpayer’s residence and a temporary work location within that
metropolitan area are nondeductible commuting expenses.

(2) If a taxpayer has one or more regular work locations away from the
taxpayer’s residence, the taxpayer may deduct daily transportation expenses incurred
in going between the taxpayer’s residence and a temporary work location in the same
trade or business, regardless of the distance. (The Service will continue not to follow
the Walker decision.)

(3) If a taxpayer’s residence is the taxpayer’s principal place of business within
the meaning of § 280A(c)(1)(A), the taxpayer may deduct daily transportation expenses
incurred in going between the residence and another work location in the same trade or
business, regardless of whether the other work location is regular or temporary and
regardless of the distance.

[RLymanC]

Mileage

In case 2 where a 1099 is issued as self employed income. can she quailfy part of her home as a home office, if yes, deduct the mileage.

[Nashville]

50-50 living

Client says her husband's lawyer told him to claim the kids he has with his ex, as "the law has changed and the kids live with both parents 50/50 and he pays support."

BP, regulations HAVE changed the perspective about a non-blood father claiming children, and there is frothing from the very mouth of the IRS itself, a plethora of different rulings which can lead one in several different directions. The clarity promised to us four years ago by the IRS has turned into a thousand winding roads. All of what I've read from The Tax Book tries to follow what IRS has actually ruled and issued.

But I do want to speak to this business of living with each parent 50-50. I've had clients plead this argument with me many times. Although the paragraph above doesn't help you much, it is absolutely clear that in many cases the tax benefit of child is tied to which spouse he lives with most of the time. Joint custody arrangements and "parenting plans" are becoming very popular in today's courts, therefore a decree can remain non-committal on issues like custody.

Many clients say the child lives with them 50% of the time and with the other spouse 50% of the time. When claiming the 50-50 argument, the client does not want to be the party to take away the ex-spouses deduction, he wants YOU to do so. I know this is impossible from a practical matter, plus it is mathematically impossible for the child to live with BOTH parents over 50% of the time.

There is a very simple answer for this that puts an end to this very quickly. For purposes of satisfying the habitation requirement, it is necessary that the child spend OVER 50% of the time with that parent. If they bring me this garbage about 50-50, I simply tell them that NEITHER of them are entitled to claim the child.

[BP.]

There is a very simple answer for this that puts an end to this very quickly. For purposes of satisfying the habitation requirement, it is necessary that the child spend OVER 50% of the time with that parent. If they bring me this garbage about 50-50, I simply tell them that NEITHER of them are entitled to claim the child.

Exactly my response this morning. They want to cling to what the lawyer says, however.

Thanks for the responses, all. Appreciate the conversation.

[Nashville]

Limits

I think it all depends. Where I live the next bigger town is 50 miles away and you bet, everyone going there is commuting. An auditor had established 70 miles as the breaking point to be deductible mileage. So it depends not only on which area you live in but also on the auditor.

It's hard to make a case in your small town that a driver going every day to the larger town is not commuting. This is a small town with a large town 50 miles away, and no other large towns for a couple hundred miles in any direction.

I think it is too arbitrary for any auditor to set a mileage limit to be observed by the IRS. From what I understand of this, if a worker was dumb enough to drive 200 miles to work and back every day, NONE of his mileage would be deductible, as it would all be commuting expense. On the other hand, if a farmer drove 10 miles to get a tractor part, then 15 miles tomorrow to buy blackleg medicine, and 12 miles last week to buy hay, all of this would be deductible subject to proper documentation. Long-and-short of this post is that I believe an auditors' arbitrary cutoff of 70 miles is improper.

I also don't think the IRS would ever agree to ANY mileage limit. They don't want to set a precedent for a safe harbor that would stop them from steamrolling taxpayers on the basis of what they consider "facts and circumstances."

People in our western states think absolutely nothing of driving 100 miles and back in the same day. If my wife were traveling with me 100 miles to a flea market, she would pack enough clothes for three days.

[RLymanC]

50-50

The new rules state that the 50/50 means the number of nights spent with one or the other parent.

The child could spend all day every day with one parent, and sleep in the other parents home. It seem impossible to have 50/50 split with the number of nights rule in effect.

[Gretel]

I think it is too arbitrary for any auditor to set a mileage limit to be observed by the IRS. From what I understand of this, if a worker was dumb enough to drive 200 miles to work and back every day, NONE of his mileage would be deductible, as it would all be commuting expense. On the other hand, if a farmer drove 10 miles to get a tractor part, then 15 miles tomorrow to buy blackleg medicine, and 12 miles last week to buy hay, all of this would be deductible subject to proper documentation. Long-and-short of this post is that I believe an auditors' arbitrary cutoff of 70 miles is improper.

I am sorry if I didn't make myself clear enough. I totally agree with you. The 70 mile limit was a limit for my area only. And then of course if we are talking normal commuting, you could work on the moon, and it is still commuting. However, one of the subjects is temporary work locations.

[FEDUKE404]

Possibly a household employee?

I see, perhaps, some wiggle room in situation #2. Otherwise, I agree with BP.

BUT I would have some concern as to whether there should be a W2, instead of a Form 1099-MISC, for the care giver (and accompanying Sch H for the tax return of the infirm). The "single client" issue may be important. Were that to be the case, I would consider it a clearer case of "commuting."

More facts would be necessary, but a W2 (and then FUTA/SUTA) seems a very strong possibility.

FE

[OtisMozzetti]

Custodial parent

Client says her husband's lawyer told him to claim the kids he has with his ex, as "the law has changed and the kids live with both parents 50/50 and he pays support."

Since the two parents combined are custodial, the rules for divorced or separated or never married parents apply. The custodial parent gets to claim a dependent exemption. Ostensibly, the parents lived with the child equal time. Then, the parent with higher AGI is the custodial parent, who gets to claim the exemption unless he or she chooses to release that exemption in writing to the other parent.

The payment of support for the child is relevant only to the extent of satisfying one of the requirements for the parents combined to be custodial. Many, many parents wrongly think that they do or should get to claim a child because they have paid child support.

[Davc]

I think a landmark case was where IRS claimed that the entire Philadelphia metropolitan area was the taxpayer's "tax home" and all trips were thus commuting trips.

The landmark case was Walker in wich the IRS claimed an entire forest as the TP's metro area. From the case:

It is clear that Rev. Rul. 90-23 , supra, allows a deduction for the cost of transportation occurring within a single metropolitan area. While in one sense the Black Hills National Forest (where petitioner’s residence and job sites were located) might not be considered a "metropolitan area", respondent argues and we accept that it should be treated as a metropolitan area for purposes of this case. 6