November 24, 2004

Missing A Refund?
and Check On Your Vehicle Deduction - NOW

What, are you crazy? IRS is sitting on refunds totaling $73 MILLION which they can't deliver! Some 87,485 people have moved without telling the IRS, so their refund checks were returned to the IRS as 'Undeliverable'.

To give the IRS your current address, submit IRS Form 8842. To get the form, go to www.irs.gov, and in the field labeled 'Search Forms & Publications For:' type in '8842' (without the quote marks). On page 2 of the form, they even give you the address to send it to.

If you are missing a Refund, go to www.irs.gov and in the Search field in the upper right corner of the screen, type in 'Where's My Refund?' (without the quotation marks).

CHECK ON YOUR VEHICLE DEDUCTION - NOW. HERE'S WHY....

I assume you've read Chapter VII of 'It's How Much you KEEP, That Counts! Not How Much You Make' (available at www.HomeBusinessTaxSavings.com). That chapter is titled, 'The Key to Your Greatest Single Deduction May Be in Your Ignition.'

You have a choice of two methods for claiming your deduction for Business-Use of your vehicle.

Method #1: Multiply the number of Business-Use miles times 37.5 cents per mile, and the resulting total is the value of your deduction.

Method #2: Add up ALL the actual costs of operating your vehicle this year - such as buying gas, oil, windshield washer fluid, transmission fluid, oil changes, tune-ups, wheel balancing, front end alignments, brake jobs, routine maintenance, accident repair not reimbursed by insurance, other repairs, car washes, new floor mats, car insurance, inspection fees, vehicle registration fees, license renewals, etc., etc. That could be a very high figure, especially with the outrageous price of gas. Now multiply that total by the percentage of Business-Use (vs. non-business use) of the vehicle. Is it higher or lower than Method #1?

Example: Let's say you put 10,000 miles on your car this year, and say 80% of those miles were Business-Use, and lets say the total Actual Costs for operating that same vehicle was $5,000. Under Method #1, you would compute your deduction by taking 10,000 miles, times 80%, times 37.5 cents per mile, which equals $3,000. Under Method #2, your deduction would be computed by taking $5,000 times 80%, which equals $4,000. Using Method 2 would give you $1,000 more in deductions than Method 1.

Here's why I said to check into it NOW. If you are going to be using Method #2, and if you will be needing to purchase new tires this winter, you might want to buy them before December 31, so that 80% of the cost (using the made-up example above) could be written off on your 2004 Tax Return.

CAUTION: This is THE most audited deduction for Schedule C filers. Why? Simply because many filers do not keep the simple mileage log described in Chapter VII. That documentation is crucial. If you have a legitimate deduction, but cannot prove the Business-Use with a written Vehicle Use Log, your deduction will likely be disallowed if your return is audited. So, you had an honest deduction, but Uncle Sam got to keep your money, just because you skipped one little step in record keeping.

This is a HUGE deduction, so do not avoid taking advantage of it, just make sure your housekeeping is done. The requirements are very specific, and very easy. Strongly suggest you re-read Chapter VII, and do it NOW because you will have time left before the end of the year to reconstruct records if necessary.

Is it worth the effort? Even if it takes you four or five hours, if you save $4,000 to $5,000, it's like being paid a THOUSAND DOLLARS AN HOUR for your effort.

There's a 'Tax Tip You Can Bank On!'
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