Whether you’re self-employed or an employee, if you use a car for business, you get the benefit of tax deductions.

There are two choices for claiming deductions:

1. Deduct the actual business-related costs of gas, oil, lubrication, repairs, tires, supplies, parking, tolls, drivers’ salaries, and depreciation.
2. Use the standard mileage deduction in 2016 and simply multiply 54 cents by the number of business miles traveled during the year. Your actual parking fees and tolls are deducted separately under this method.

Which Method Is Better?

For some taxpayers, using the standard mileage rate produces a larger deduction. Others fare better tax-wise by deducting actual expenses.

Tip: The actual cost method allows you to claim accelerated depreciation on your car, subject to limits and restrictions not discussed here.

The standard mileage amount includes an allowance for depreciation. Opting for the standard mileage method allows you to bypass certain limits and restrictions and is simpler– but it’s often less advantageous in dollar terms.

Caution: The standard rate may understate your costs, especially if you use the car 100 percent for business, or close to that percentage.

Generally, the standard mileage method benefits taxpayers who have less expensive cars or who travel a large number of business miles.

How to Make Tax Time Easier

Keep careful records of your travel expenses and record your mileage in a logbook. If you don’t know the number of miles driven and the total amount you spent on the car, your tax advisor won’t be able to determine which of the two options is more advantageous for you at tax time.

Furthermore, the tax law requires that you keep travel expense records and that you show business versus personal use on your tax return. If you use the actual cost method for your auto deductions, you must keep receipts.

Tip: Consider using a separate credit card for business, to simplify your recordkeeping.

Tip: You can also deduct the interest you pay to finance a business-use car if you’re self-employed.

Note: Self-employed individuals and employees who use their cars for business can deduct auto expenses if they either (1) don’t get reimbursed, or (2) are reimbursed under an employer’s “non-accountable” reimbursement plan. In the case of employees, expenses are deductible to the extent that auto expenses (together with other “miscellaneous itemized deductions”) exceed 2 percent of adjusted gross income.

Call today and find out which deduction method is best for your business-use car.

• By Leon Clinton
• September 7, 2016

Tax-related identity theft occurs when someone uses your stolen Social Security number to file a tax return claiming a fraudulent refund. It presents challenges to individuals, businesses, organizations and government agencies, including the IRS.

Learning that you are a victim of identity theft can be a stressful event and you may not be aware that someone has stolen your identity. In many cases, the IRS may be the first to let you know you’re a victim of ID theft after you try to file your taxes.

The IRS is working hard to stop identity theft using a strategy of prevention, detection, and victim assistance. In 2015, the IRS stopped 1.4 million confirmed ID theft returns and protected $8.7 billion. In the past couple of years, more than 2,000 people have been convicted of filing fraudulent ID theft returns. And, in 2014, the IRS stopped more than $15 billion of fraudulent refunds, including those related to identity theft. Additionally, as the IRS improves its processing filters, the agency has also been able to halt more suspicious returns before they are processed.

Here’s what you should know about identity theft:

1. Protect your Records. Do not carry your Social Security card or other documents with your SSN on them. Only provide your SSN (social Security Number) if it’s necessary and you know the person requesting it. Protect your personal information at home and protect your computers with anti-spam and anti-virus software. Routinely change passwords for all of your Internet accounts.

2. Don’t Fall for Scams. Criminals often try to impersonate your bank, credit card company, and even the IRS in order to steal your personal data. Learn to recognize and avoid those fake emails and texts.

3. Beware of Threatening Phone Calls. Correspondence from the IRS is always in the form of a letter in the mail. The IRS will not call you threatening a lawsuit, arrest, or to demand an immediate tax payment using a prepaid debit card, gift card, or wire transfer.

As schools around the nation re-open, it is important for taxpayers to be particularly aware of a new scam going after students and parents. In this latest scheme, telephone scammers have been targeting students and parents and demanding payments for non-existent taxes, such as the “Federal Student Tax.”

People should be on the lookout for IRS impersonators calling students and demanding that they wire money immediately to pay a fake “federal student tax.” If the person does not comply, the scammer becomes aggressive and threatens to report the student to the police to be arrested.

4. Report ID Theft to Law Enforcement. If you cannot e-file your return because a tax return already was filed using your SSN, consider the following steps:

• File your taxes by paper and pay any taxes owed.
• File an IRS Form 14039 Identity Theft Affidavit. Print the form and mail or fax it according to the instructions. You may include it with your paper return.
• File a report with the Federal Trade Commission using the FTC Complaint Assistant.
• Contact one of the three credit bureaus so they can place a fraud alert or credit freeze on your account.

5. Complete an IRS Form 14039 Identity Theft Affidavit. Once you’ve filed a police report, file an IRS Form 14039 Identity Theft Affidavit (see below). Print the form and mail or fax it according to the instructions. Continue to pay your taxes and file your tax return, even if you must do so by filing on paper.

6. IRS Notices and Letters. If the IRS identifies a suspicious tax return with your SSN, it may send you a letter asking you to verify your identity by calling a special number or visiting a Taxpayer Assistance Center. This is to protect you from tax-related identity theft.

7. IP PINs. If a taxpayer reports that they are a victim of ID theft or the IRS identifies a taxpayer as being a victim, he or she will be issued an IP PIN. The IP PIN is a unique six-digit number that a victim of ID theft uses to file a tax return. Each year, you will receive an IRS letter with a new IP PIN.

8. Data Breaches. If you learn about a data breach that may have compromised your personal information, keep in mind that not every data breach results in identity theft. Furthermore, not every identity theft case involves taxes. Make sure you know what kind of information has been stolen so you can take the appropriate steps before contacting the IRS.

9. Report Suspicious Activity. If you suspect or know of an individual or business that is committing tax fraud, you can report it on the IRS.gov website.

10. IRS Options. Information about tax-related identity theft is available online at IRS.gov. The IRS has a special section on IRS.gov devoted to identity theft and a phone number available for victims to obtain assistance.

If you have any questions about identity theft and your taxes, don’t hesitate to call the office for assistance.

• By Leon Clinton
• September 4, 2016

September 12

Employees Who Work for Tips – If you received $20 or more in tips during August, report them to your employer. You can use Form 4070.

September 15

Individuals – Make a payment of your 2016 estimated tax if you are not paying your income tax for the year through withholding (or will not pay in enough tax that way). Use Form 1040-ES. This is the third installment date for estimated tax in 2016.

Corporations – File a 2015 calendar year income tax return (Form 1120 or 1120-A) and pay any tax due. This due date applies only if you made a timely request for an automatic 6-month extension.

S corporations – File a 2015 calendar year income tax return (Form 1120S) and pay any tax due. This due date applies only if you made a timely request for an automatic 6-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1120S) or a substitute Schedule K-1.

Partnerships – File a 2015 calendar year income tax return (Form 1065). This due date applies only if you were given an additional 5-month extension. Provide each shareholder with a copy of Schedule K-1 (Form 1065) or a substitute Schedule K-1.

Corporations – Deposit the third installment of estimated income tax for 2016. A worksheet, Form 1120-W, is available to help you make an estimate of your tax for the year.

Employers – Nonpayroll withholding. If the monthly deposit rule applies, deposit the tax for payments in August.

Employers – Social Security, Medicare, and withheld income tax. If the monthly deposit rule applies, deposit the tax for payments in August.

• By Leon Clinton
• September 1, 2016