Sales is one of the highest paid professions out there, and a savvy man or women, particularly one that’s willing to travel extensively, can make a great deal of money if they are persistent at the profession.
However, as the old saying goes, it takes money to make money, and whether you work for yourself or for a company, getting reimbursed for every possible expense you are allowed to claim on your taxes can go a long ways toward your bottom line. Take, for example, the federally allowed mileage rate for auto travel while on business.
Anderson Advisors, a legal business and tax firm, offers a detailed explanation as to how much you may claim on your federal taxes regarding an IRS mileage rate. Anderson explains that there are essentially two means of calculating the mileage rate, either by using what the IRS terms a standard mileage rate or by using an actual expenses method.
The standard mileage rate is the easiest to claim. You simply keep a log of the mileage accrued during the business, as well as keeping gas receipts and claiming the standard mileage rate, which in 2019, is 58 cents per mile.
You may not claim the standard rate for any miles driven as personal rather than business, and in the rare event that you have other salesmen working for you, may not claim the standard rate for more than four vehicles.
By taking the standard mileage rate, you forfeit any expenses above and beyond the 58 cents per mile. Thus, if you need to spend $400 a month leasing a car, $50 for parking, and another $200 per month on insurance, and $200 a month on gas, you would need to travel nearly 1500 miles a month for you to break even compared to the actual expenses method,
Other business expenses for the actual expenses method include depreciation on your car, license and registration, and repairs. So overall, you are much better off using the actual expenses method, but there is a caveat. You must carefully log all these expenses into a systematic journal to claim the deduction, backed by receipts.
Many salesmen, however, do claim the actual expense method and use an online app such as Simply Auto or Simply Auto Expense Tracker, available from both the Google Play and Apple Stores. With an auto expense tracker, priced from as cheap as free to as little as $5, you can fully automate the task of keeping track of all the logs and expenses the IRS requires.
The IRS may never even question your auto deductions unless you claim some ridiculous numbers, but if you are ever audited, an auto expense tracker is a quick way to show all of your deductions are legit.
Be aware, too, of claiming mileage if your employer reimburses you. The IRS will only allow you to claim a deduction for non-reimbursed mileage. If you work for a company, even if they reimburse you a pittance of what the IRS allows, you can’t use either computational methods to claim a deduction on your mileage. And, in fact, after 2017, the new tax code eliminated mileage deductions for all employees totally. Only the self-employed can now claim mileage.
Also, the IRS allows for deductions for only those expenses which are necessary and reasonable. If you drive 2,000 miles per year on sales calls, it may seem a reasonable expense for you to install a high tech stereo with fantastic speakers in your car to enjoy some “tunes” along the road, but the IRS would differ.
How do you claim a deduction?
To claim a mileage deduction, claim it under a schedule C on your tax form. The amount of your deduction may be sizeable, so in the event of an audit, be prepared to show the IRS your complete driving log.
Other expenses that are deductible?
If you are self-employed, then be aware just about any business expense you encounter such as cell phones, office space, business cards, airline tickets, and hotel expenses are also deductible. That’s the good news. The bad news is that you will need to pay self-employment tax to the IRS on your income, which currently is around 15.3 percent.