Due Diligence With Mileage

[geekgirldany]

I had a customer call me today and said that someone from work told him he could deduct mileage for his job. First he never told me he drove so much for his job and I have been doing his taxes for 3 years.

I went on to explain about commuting versus deductible mileage. He said he goes from his job to call on customers. He then gave me a figure of 30,000 miles he drove. Deduction is around $14,000. W-2 shows $24,000 at his job. So he only made $10,000???

I asked him if he had a log of the customers he called on and the date. No he does not. I asked him about the odometer and receipts from when he got his oil changed. He said he got a new car at the end of 2006 and gets the oil changed every 2,000 miles. But he doesn't know where the receipts are at.

I explained what he needed for the deduction if ever audited. A log book showing the customers, when he called on them, or even a calendar showing this.

I would like to ask what is my due diligence in a situation like this? The way he described his job I feel like he has more than likely drove that much but he doesn't have the proof. Of course 25,000 miles comes up to a very large deduction. He is wanting me to amend prior years also.

After studying for my exam I feel like I have to be more diligent (so to speak) in getting this information from the customer. Should I leave it to them to provide the proof and have them sign off about no information provided on the deduction?

[Jiggers]

Due Dilligence with Mileage

Can he answer the questions on the 2106 regarding Vehicle Expenses:
1. Do you have evidence to support your deduction?
2. If "Yes", is the evidence written?

If he can't answer "Yes" to both questions, no deduction.

And as far as amended returns and this return and this being such a large number, I would ask for the written evidence!

Again, no written evidence presented to you, no deduction.

That is the law.

[August @ ADG Financial]

You are most likely right that he does drive these miles for work. But who in their right mind would take a job like this at this rate of pay. So I think he most likely is being reimbursed for some of his expenses. I just got back from the NATP meetings in Atlanta and this would be a $1000. penalty if you get it wrong and didn't have a reasonable reason for putting it down if this guy gets audited. I think I would want to see some type of records. Or you could just ask him he would mind if you called Sam's and ask them their polcy on this. And see if he backs down.

[ChEAr$]

Who, you ask?

You are most likely right that he does drive these miles for work. But who in their right mind would take a job like this at this rate of pay. So I think he most likely is being reimbursed for some of his expenses. I just got back from the NATP meetings in Atlanta and this would be a $1000. penalty if you get it wrong and didn't have a reasonable reason for putting it down if this guy gets audited. I think I would want to see some type of records. Or you could just ask him he would mind if you called Sam's and ask them their polcy on this. And see if he backs down.

would take a job like this? Someone who really wants to work, and needs a job. Thank goodness there are many of those out there not drawing welfare. Okay, enough of that.

Danny, of course a 1040x for last year is out of the question given no log books. But should he right now, starting in August, keep the log book for rest of year, you could rely on those
five months to extrapolate into 12 months, given same job and duties.

You need to tell him this, sit him down and read him the riot act so to speak.
Well, at least on the phone. (grin

[geekgirldany]

Thank you guys for answering. I am going to tell him for 2007 to get a letter from his employer saying he has to use his car for the job. If he gives me a hard time about this then I will tell him to keep his mileage for the rest of 2008 for a deduction on that tax year. I am going to start getting strict on these people about the mileage. I know of atleast two more who I need to talk to about this. I am not putting myself in jeopardy anymore!

Thank you all again for responding.

[geekgirldany]

Oh Harlan... I was trying to tell him over the phone... he was talking over me while I was trying to tell him about the log book. Kinda like a kid putting his fingers in his ears and yelling

[Nashville]

Reconstitute the Log

I would not object to taking the deduction if he could reconstitute a log. The biggest hurdle to face would be supplying dates. ANYONE can supply ficitious dates, but getting through that problem with a modicum of credibility would leave only the number of miles to record.

Some employers REQUIRE sales people to specifically record visits and conversations with customers. That might help. I wouldn't sign off on just pulling dates out of the air two years after the fact.

Even if he does this he will probably miss half of his mileage. But I would let him do this using his own information if he wants to get back any money. He probably expects you to "wing it" for him, but I would put the ball in his court early on, especially if he is a PITA client.

As I've mentioned before, as long as there is "Shifty-eyed Sam" on Canton Highway who will do this for him, it's hard for ethical preparers to keep customers. Remember the barroom definition of the best tax preparer is ths one who gets the biggest refund back. And seems like those guys never get caught.

[ChEAr$]

One more thing

Oh Harlan... I was trying to tell him over the phone... he was talking over me while I was trying to tell him about the log book. Kinda like a kid putting his fingers in his ears and yelling

which I didn't quite get from your OP. What about reimbursement? Did you ask him
about that?
IF W2 includes reimbursement, then no problem.
If not, then reimbursement must be subtracted on the form 2106. But you knew that.

anyway, the deduction might mean 14,000, but if that's at standard mileage rate, then
that's not a measure of actual expenses subtracted from 24,000. What he's been working
for is 24,000 minus actual expenses on the job.

[joanmcq]

Remember too, if he is audited, the first thing the IRS asks for is the employer's reimbursement policy. No policy, or a signed letter stating the employee gets no reimbursement although the car use is required, big adjustment. And 14K of employee biz expenses against 24K in income is a big, big red flag.

[geekgirldany]

So there needs to be a policy by the employer saying that the employee must use his own car and that there is no reimbursement for this use.

[geekgirldany]

He told me he does not get reimbursed. Well it is amazing what you will find online. I looked for his job description for the particular company he works for.

Well I guess I will be showing him this tomorrow.

[OtisMozzetti]

Educate the client

In addition to whatever else is being done, I always put forward a mighty try to educate the client, to convey that it would serve the client's interest very well to keep a log of mileage during all future years. It is a chance to convey to the client that you are looking out for his best interest, via the right bedside manner during that conversation.

[ChEAr$]

Bye bye

He told me he does not get reimbursed. Well it is amazing what you will find online. I looked for his job description for the particular company he works for. I found the following:

- Completes daily activity log and tracks sales sign ups, appointments, calls and programs. Submits clear mileage records and other expense receipts for reimbursements.

Well I guess I will be showing him this tomorrow.

Assuming the job description of which you have a copy exactly fits him to a tee,
you can show it to him, and then tell him you're sorry but you can't help any longer.

Believe me, you'll sleep better afterwards.

[JG EA]

Can he answer the questions on the 2106 regarding Vehicle Expenses:
1. Do you have evidence to support your deduction?
2. If "Yes", is the evidence written?

If he can't answer "Yes" to both questions, no deduction.

And as far as amended returns and this return and this being such a large number, I would ask for the written evidence!

Again, no written evidence presented to you, no deduction.

That is the law.

Someone already said this in this post, but let me say again. You can answer no to the second question and take the deduction.

If the client actually drove the miles and was not reimbursed he can reconstruct or just prepare his verbal evidence. As was already pointed out there may be invoices of people visited at his job or other creditable information.

[David1980]

Someone already said this in this post, but let me say again. You can answer no to the second question and take the deduction.

If the client actually drove the miles and was not reimbursed he can reconstruct or just prepare his verbal evidence. As was already pointed out there may be invoices of people visited at his job or other creditable information.

Replace "not reimbursed" with "couldn't be reimbursed".

Assuming the company will not reimburse I'd take the expenses. When it asks if there is written evidence I'd say no.