Snowplowing with a fourwheeler and 1099-MISC

[mblatour]

I have a client whose husband received a 1099-MISC for $1300 of nonemployee compensation. Apparently he plowed the parking lot of a nearby condominium complex using his ATV (fourwheeler) with a plow on it.

The wife provided me with a receipt for $32.06 for salt (to melt the walks), a copy of the insurance policy on the wheeler totaling $824 for the year, and a copy of the loan interest on the wheeler totaling $1,379 for the year.

The wife was going to talk to the husband in order to determine what percentage the wheeler is for personal vs. business use. She figures it will be a high percentage for business because they only use it recreationally a few times a year.

This is exactly what I've been told and the information I've been given. This whole deal doesn't seem right to me and the Schedule C will certainly show a loss. Would you question any of this or just report it as such? I have my thoughts on this, but I'd love to hear yours.

Thanks,
Becky

[TaxLadyinPA]

log records are the answer

I would say the same thing I tell my lawn mowing clients. In order to take deductions they MUST keep accurate WRITTEN records of *hours* or *miles* on the machine so that I can properly apply the percentage of business use. I do NOT accept the "Well we use it mostly for business"

When they actually keep the log … it is amazing to them just how much more personal use then business use they have. (maybe lawn mowing wasn't the best example but I have one that mows as a business and also mows for free so I make him keep accurate hours from the "odometer" {what is it called when it measures hours not miles}.

Anyhow ….. if they have accurate records there isn't any reason they can't take all the allowed deductions. Just remember the percentage of business use also goes towards that interest paid, insurance, fuel, etc.

[RitaB]

Wow, I need a break

Becky, when I read your title I thought, "How do you plow with a 1099-Misc? It must be cardboard."

[erchess]

Profit Motive

He's certainly not making a profit now. To my mind if he's not either looking at ways to trim his expenses or ways to either get paid more from this job or ways to get other jobs, then he lacks Profit Motive. If he lacks Profit Motive he has a hobby, not a business. See the Hobby Rules TTB 1040 Edition 5-18 and following.

What tax lady said about the necessity of logs to prove miles or hours is also important. I will in my first year with an activity allow a log that is reconstructed from memory if it seems reasonable provided the client agrees to keep a log starting at once. Next year if we have no log there are no deductions of the sort that need the log. It is of course possible that the condo ownership is already keeping track of hours scraping and all we need to account for is hours spent on personal use of the toy.

Furthermore before I agreed that all of the salt was a deduction I would have this client explain to me in a signed statement how it was that none of the salt in question went on their personal sidewalk. Maybe they don't have a sidewalk for which they are personally responsible or maybe they for whatever reason don't use salt on their personal sidewalk or maybe they do use salt on their personal sidewalk but not from the same bag. I would accept any story that seemed reasonable but I would leave this taxpayer no wayt of denying what I was told about this scraping activity.

[mblatour]

Rita,

Ha! That's good! It's just proof that you are suffering from brain exhaustion due to all of the long days/nights we've all been working as we wind up yet another tax season.

I'd get a kick out of seing a cardboard plow. Weather channel this morning said we're supposed to get 8 to 10 inches in Duluth tomorrow. Looks like March is going out like a lion. My clients better get out their four wheel drive vehicles and winter boots if they plan on coming to pick up/drop off their taxes. Gotta love Minnesota!

Becky

[mblatour]

Erchess,

your points are all well taken. I know I need to be a little more strict on these sorts of things. Too often I just look at the receipt and/or bill and go ahead with the little things. They do all add up in the end. I'll be sure to ask more questions. I can guarantee you that they have no sort of a log for last year. And considering that we are ending yet another snow season, they won't have a log for filing their next years taxes either. Humbug! I hate dealing with these types of returns.

This client's return has suddenly became a real pain. I have two other tough calls to make on their return as well. Is it April 15th yet?

Becky