Mileage for Construction Workers and Contractors

[GTS1101]

I have had a few clients that have been audited regarding business mileage claimed for Construction Workers and Contractors. And for each two different outcomes resulted. I always understood the law as if you work at temporary locations for less than one year than all your business mileage is deductible from the residence to those temporary locations. As I take a second look at the law I see that I might be wrong in my thinking. I have several clients that work in the Construction field. One is a welder. The company has an office and he is an employee but he normally does not need to go to the shop. He goes from his residence and drives about 80 miles each way. Then he may have another assignment for three months that is 50 miles each way from his residence. Then the next job is 60 miles away. My client was audited and the auditor said he can only deduct mileage from the shop to the job site even if he does not go to the shop first. That doesn't seem right to me. My other client is a painter and in a similar situation. He doesn't go to the shop much but the IRS allowed all his miles as he had all the proof of the temporary jobs from the employer and he had his mileage log. He also went from his residence to the temporary job sites all year long. So which one is right? Can the mileage be deducted from the residence to temporary locations or is it only from the shop to the job site even if he never goes to the shop first.


Thanks!

GTS1101

[RLymanC]

Mileage

You need to establish a principal or regular place of business. If there is more than one job you need to figure out which job is his regular or main job. This could be the job where most of his income is made, hopefully close to home. The mileage to that place is non-deductable.

The mileage to the other temp jobs is deductable from the home and return.

After arriving at his mileage deductable location, and he travels to another job, that is also deducatable.

I have a construction worker that lives 250 miles from his regular job location, that is his tax home, all travel and other expenses are non-deductable .

If he gets sent to other locations for a short time all his travel and mileage is deducatable from his home, if he stays over night, take the per diem meal allowance. If he rents a room out of the area that is deducatable.

2007 Pub 17 page 27

[solomon]

http://www.taxlinks.com/rulings/findinglist/revrulmaster.htm

See Revenue Ruling 99-7.

[Bees Knees]

GTS1101 is describing two similar circumstances with different audit outcomes.

It appears to me the different audit outcomes were a result of one having better records than the other.

As the other posters said, for the temporary work location rule to apply, you have to establish a regular place of business. Just what is a regular place of business can be subject to facts and circumstances. If one of your construction workers never needs to go to the company office for anything, that might not be considered a regular place of business, and the construction worker gets no mileage to temporary work locations, other than job to job mileage. If, on the other hand, he or she goes to the company office from time to time to get assignments, or other administrative stuff, then mileage from home to the temporary work sites would be allowed. Having some kind of documentation for duties performed at the company office will help. A mileage log also helps.

[JohnH]

What about a post office box?

What if the employee rents a post office box near his home that he checks each day to get his assignments for either that day or for the upcoming days or weeks, receive his paychecks, receive company memos, etc? Would his travel distance from home to the post office box be a commuting distance and then the travel from the post office to his next duty assignment each day be deductible travel?

[Zee]

What if the employee rents a post office box near his home that he checks each day to get his assignments for either that day or for the upcoming days or weeks, receive his paychecks, receive company memos, etc? Would his travel distance from home to the post office box be a commuting distance and then the travel from the post office to his next duty assignment each day be deductible travel?

IMHO, No. A post office box isn't a regular place of business, there are no services being performed.

[JohnH]

Just a thought

I'm not advocating one position or the other, but this post office scenario comes up form time-to-time is various versions, most of them being a little shaky.

However, years ago I had a construction worker client who drove about 100 miles each way daily, and after I explained the rules to him, he got a paper route. He only delivered about 50 papers each day, which took less than 1/2 hr, but when he finished his "first" job each morning he would then drive 100 tax-deductible miles to his "second" job. One of those clients who actually listened.

[RLymanC]

Paper Route won't fly

in the event of an audit.

The rule is if you have more than one job, which one is your regular job? To determine that the IRS (and you should) would consider the time spent on each job and the income you have from each job. Clearly the paper route would not qualify as his regular job, the mileage to his main job would be disallowed.

[New York Enrolled Agent]

So which one is right? Can the mileage be deducted from the residence to temporary locations or is it only from the shop to the job site even if he never goes to the shop first.

GTS1101

GTS1101

Solomon has given you the document to need to print out and carefully read. Rev Ruling 99-7 is the seminal IRS answer to your question. The Tax Court uses that ruling in applying the facts & circumstances of each taxpayer. While I would advise you to read the entire document, I'm pasting the holding as written by the IRS:

[start] 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 section 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. [end]

Situation (3) is not relevant to your facts, so you need to look at (1) or (2) and see if your taxpayers fall into either category.

(1) OUTSIDE the metropolitan area - how far is outside?????????? Not defined anywhere but in at least one TC Summary (Wheir) case 35 miles was used by the taxpayer and the Court allowed it. I CAUTION all readers - a Summary case has no precedential vlaue. The IRS originally said the whole state of MN was the metropolitan area, then reduced that to 80 miles but never attempted to refute the taxpayer's claim. Thus the Court (in the absence of an IRS response) allowed the 35 miles. But don't assume 35 miles is any magic number.

(2) Does the taxpayer have a regular work location???? IMO, the office does not appear to be a regular work location under your facts. Forget the post office idea - any time we "wink" at something we know it doesn't pass the "smell" test (especially given the new preparer penalties and the MLTN standard).

As Bees noted a log book would be an absolute necessity.

[Kram BergGold]

PO Box and paper route

Both of these work for me. However these have nothing to do with temporary work sites. These create a deduction for transportation between 2 work sites. So in both cases home to PO Box or paper route is a non deductible commuting expense. From either to the construction or any job site is deductible as transportation between 2 job sites. Then from the job site back home is not deductible as this is just commuting.

[erchess]

So let's suppose we have an employee

who seldom works in the same location two days out of the year. What I am hearing is that if he goes to the home office each day for some legitimate reason then he can deduct mileage from there to his first stop. and from his first stop to his second and so on but not the trip back home from his last stop of the day. It shouldn't matter whether he is plumber or an electrician or a tax adviser or an installer of water purification systems. Am I right so far?

Now, what changes if our client is self employed? He could be what I call truly self employed (responsible for getting his own clients) or he could be tied in with some outfit that gives him work to do as is typically the case with a Satellite TV installer. When I started in the business I was told that these people had the same rule about not being able to deduct mileage between home and the first and last stops but that they could be creative about setting up those first and last stops. One client of the firm lived within a block or two of his bank but he checked his balance and the interest rates on his business bank accounts and loans in the morning and deposited his receipts in the evening and so virtually all of his mileage was deducted. I always did think the morning stop was fishy but I was not responsible for serving this client so I said nothing. (I never knew his name or what business he was in but his account was serviced by someone who also taught classes I took so she used him as an example. No personally identifiable info about him was revealed to anyone who did not need to know it in order to do their jobs.)

[Kram BergGold]

erchess I agree

I would have a hard time with the going to the bank to check the balance. Of course if your S/E client had a home office all driving would be deductible and he would not have to mickey mouse around with the bank.

[erchess]

Thank you

Kramberg. I may be wrong in my recollection that the guy was a contractor as opposed to an employee. I did not know that a home office made all mileage deductible.

[Kram BergGold]

erchess

If your client is S/E and has a home office then his principal place of business is his house and all driving for that business counts. There is no commuting. Usually, this is the reason someone wants a home office. The car deduction saves more than the home office deduction.

[erchess]

It's the Principal Place of Business idea that bothers me -

Clients are not invited to my home office, and when one insisted on coming I had to see him at my kitchen table because there was no room for both of us in my home office. Also, let's consider the case of a typical self employed tradesman. The individual takes care of administrative matters and does whatever to generate business from the home office but the work for which he is paid is done in the homes and offices of his clients. Would not those homes and offices be his principal place of business. Now I learned a while back that the Soliman case has been overturned and that one can again deduct the home office under these circumstances. However it would be my argument that for mileage purposes all his business mileage is commuting. What am I missing?