Question

Ryan, a new client or yours, is a self-employed caterer in Mount Olive, NC. Ryan drives...

Ryan, a new client or yours, is a self-employed caterer in Mount Olive, NC. Ryan drives his personal van when delivering catered meals to customers. You have asked him to provide the amount of business miles driven using his vehicle. You are planning on using the standard mileage method to calculate Ryan's deduction for transportation costs. Ryan has responded by saying, " Well, I don't really keep track of my miles. I guess I drove around 5,000 miles last year for the business." What would say to Ryan and can you help him (client letter)? Also, when helping a client you must show your research and present tax authority (IRS Code, Regulation, Court Case, etc.but in this course you can use an IRS Publication) not your textbook!

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Answer #1

SOLUTION

It is important that Ryan be able to substantiate his transportation deduction. At a minimum, Ryan should provide written documentation that includes the amount (mileage for each business use and the total miles for the year), time (date of the use of the car), business destination, and purpose. An easy way for Ryan to keep this information would be in a vehicle log that he kept in his van. It is not acceptable for Ryan to approximate or estimate his business mileage. If he has not kept a log, supporting documentation must be provided in order to take the deduction. One way that Ryan could do this is by reviewing invoices of deliveries during the year.

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