Mileage for Door Dash/Uber Eats

[DANRVAN]

7 minutes ago, cbslee said:

log truck driver isn't driving a personal vehicle

But what authoritative basis is the IRS going to use to make that disallowance?

[DANRVAN]

19 minutes ago, DANRVAN said:

Or change the scenario, say client is owner operator of a small delivery van in large metro are and spends an hour (or more) driving x miles from one end of the city to the other to pick up his first delivery.  

Are you going to say the time and distance he spent in traffic burning fuel was commuting?

What if it was a vehicle that could be used for personal or business?  Where are you going to draw the line to is disallow the deduction and for what reason?

[Lee B]

Admittedly there is a fair a mount of grey between Business & Commuting Mileage, but the IRS position and the Court Cases have remained pretty

consistent for many years:

 

"Recent case: A contractor residing in Manchester, Ohio commuted to five temporary worksites in 2007. The sites ranged in distance from 74 miles to 96 miles from his home. His employer did not reimburse the travel expenses.

On his 2007 federal income tax return, the contractor claimed a deduction of nearly $24,000, but the IRS disallowed almost all of it.

The Tax Court sided with the IRS because the temporary worksites weren't outside the metropolitan area where the contractor normally lived and worked (Saunders, TC Memo 2012-200."

 

"In 2005 Glenn Patrick Bogue, an independent contractor based in Cherry Hill, N.J., worked on two residential property renovations in Philadelphia and one renovation in Melrose Park, PA.

In 2006 he worked on properties in Melrose Park and Elkins Parks, both in Pennsylvania, and a property in Haddonfield, N.J. During both years Bogue lived in a house owned by his fiance.

The five work sites were 20.1, 15.7, 15, 14.7, and four miles, respectively, from his residence. He worked at each site for several months and when one project was finished moved on to another site.

On his tax returns for the two years in question, Bogue claimed deductions for various expenses relating to transportation to the worksites. The claimed deductions included:

Car and truck expenses of $9,232 for 2005 and $9,657 for 2006 on Schedule Cs (Profit or Loss from Business);

Tolls of $660 for 2005 and $400 for 2006 as Other Expenses on the Schedule Cs,;

Auto insurance expenses of $2,028 and $1,866 for 2005 and 2006, and

Car rental expenses of $650 incurred in 2005 when his own vehicle was inoperable.

The IRS determined tax deficiencies for the 2005 and 2006 tax years. Bogue challenged the assessments in Tax Court.

Tax Court's ruling: The Court denied the deductions for transportation and other auto-related expenses for travel between the residence and various worksites. It found that the expenses all fell under the general nondeductible personal expense rule for commuting costs. In reaching this conclusion, the Tax Court rejected Bogue's arguments that the expenses were deductible under all three of the tax law exceptions. According to the court:

The home office exception was unavailable to Bogue for lack of proof that he actually used an office in his residence exclusively for business;

The temporary distant worksite exception was unavailable because the worksites at issue, although away from Bogue's home, were within the normal distance/areas where he normally worked, and

The regular work location exception was unavailable because the only locations at which he worked during the years at issue were temporary worksites and he showed no other, regular work locations.

The Tax Court rejected Bogue's contention that his storage shed, car, bank and various building supply stores should be treated as regular work locations.

Furthermore, while the costs of transporting tools to and from worksites, travel to supply stores or travel between worksites themselves might qualify as deductible transportation or travel, deductions for these expenses were denied because Bogue failed to substantiate them.

Undeterred, Bogue appealed to the Third Circuit Court of Appeals.

Third Circuit's ruling: In his appeal, Bogue limited his argument to the regular work location exception. He claimed that he met this exception because the bank and various building supply stores he frequented were regular work locations. The court affirmed the Tax Court's ruling, stating that construing a building supply store or bank as a regular work site strained the meaning of work location, noting that Bogue visited those locations as a customer rather than a worker.

The Supreme Court hammered the final nail in this case, declining to review it.

Lessons to be learned: The IRS is likely to challenge travel-expense deductions that don't measure up to one of the three exceptions. Consult with your accountant to ensure you are on firm ground before you stake your claims. Keep detailed and accurate records relating to any travel that may be deductible."

[DANRVAN]

2 minutes ago, cbslee said:

Admittedly there is a fair a mount of grey between Business & Commuting Mileage, but the IRS position and the Court Cases have remained pretty

consistent for many years:

But none of the cases, or any I have seen fit the facts and circumstance of the OP driver.

The drivers are engaged in the business of transporting goods or people.  

16 minutes ago, DANRVAN said:

What if it was a vehicle that could be used for personal or business?  Where are you going to draw the line to is disallow the deduction and for what reason?

I have not seen a answer to this question.

If OP client was mine, I would explain to him or her as I have in this thread and the potential disallowance by the IRS.

However, if they wished to take the deduction I would document their choice in writing and would not consider it to be an unreasonable position.

[Lee B]

Our first hurdle is "more likely than not." ( greater than 51 % )

Our second hurdle is "substantial authority." ( greater than 40 % and less than 52 % )

There is not enough support that I would be comfortable taking that position.

 

[DANRVAN]

1 hour ago, cbslee said:

There is not enough support that I would be comfortable taking that position.

It looks to me like this would be a case of first impression with no clear authority given the facts and circumstances, therefore no penalty for an unreasonable position.

Given the actual dollar amount of the potential tax benefit, the auditor would probably either allow or disallow, and that would be the end of it.

 

[jklcpa]

I think you need to look at the facts and circumstances of this particular taxpayer's case. As Gail from Virginia asked early on, does this person have another job and is part of that travel considered commuting to the 1st pick up of goods and from last drop off to home?   Or  the alternative, does this person have another job, does the person do the doordash on his otherwise day off?

Next, Bulldog Tom mentioned that he thought the mileage would be commuting if the person did not qualify for a Home Office deduction. I do not believe that is the case. One does not have to actually qualify for that in order to say that the principal place of that business' activity is the home.   Example - taxpayer could fail the exclusive use test of the space while the overall principal place of business is still in the home if there is no other.

 

[Catherine]

I was just going to say what Judy already said.  There is a difference between having a home-based business, and being eligible for the difficult home office deduction.  Plenty of businesses don't get over that sole-and-exclusive-use hurdle.  Let's face it; not many have two desks and two chairs and two computers, one to pay the house bills and the other for paying the business bills.  That does not make the home-based business any less of a business.  

[Yardley CPA]

We're not required to audit our client's, correct?  We're required to ask questions and to obtain a certain comfort level in the positions we make on their returns.  I spend extra time with clients when they have a Schedule C, on expenses they claim, including going over the IRS regulations.  I'm not auditing them, however.  If my client provides a reasonable answer to my questions, I'm good.  I always play devils advocate and provide them "what if" scenarios in regard to the IRS potentially knocking on their door.  As long as they recognize the issues which may present, I rarely refuse to prepare a return.  I think communicating the IRS provisions and making sure clients are fully informed is paramount, but I'm not conducting a full blown audit.  

In regard to Door Dash mileage, my personal belief is that mileage from your home to the first restaurant/stop, and back home after your last delivery is mileage that should be questioned given the individuals circumstances.  Mileage in-between stops, going from customer 1 to restaurant 2, and so on, assuming they are not conducting personal business, seem like business miles.  As long as what the client is claiming is reasonable, I'm good and place it on the return.