Cottage Food Law ( What Does The IRS Allow for Mileage )

Posted by Damian Roberti on

Did you know that the mileage you use for Cottage Food Business is Potentially TAX DEDUCTION!

It's also a good idea to set certain standards for your workers' mileage logs if you're a business owner. If your employees manually monitor mileage, you may obtain a free Excel mileage log form to provide to them so they know what to anticipate from their reports.

Disclaimer I am NOT an accountant and not offer accounting advice ( check with your accountant about these tips!) Hope this helps....

The IRS Standard Mileage Rate is a yearly mileage reimbursement rate established by the IRS for use by workers, contractors, and employers for tax reasons. This tariff varies from year to year and is applicable to vehicles such as automobiles, trucks, and vans.
The rates for the 2021 tax year are as follows:

For commercial miles driven, the rate is 56 cents per mile (down 1.5 cents from 2020).

For medical or relocating needs, 16 cents per mile is charged (down 1 cent from 2020).

14 cents per mile traveled in support of a charity cause (currently fixed by Congress).

The standard mileage deduction is the cornerstone for most companies' employee reimbursement arrangements. Other firms compensate their employees at a rate that is greater or lower than the usual mileage rate.
If a company operates in a region where fuel prices are greater, for example, it may utilize a higher reimbursement rate than the IRS standard mileage rate.
Employees cannot deduct business transportation charges on their tax returns if their firm does not have an employee reimbursement scheme in place.
The deduction for unreimbursed employee expenditures was repealed by the Tax Cuts and Jobs Act (TCJA) of 2017. For the time being, business miles can only be deducted by self-employed persons and business owners.
How to Reimburse Taxes for Mileage
Employees who were not compensated for business-related mileage may deduct it on their personal tax returns prior to the TCJA. Many firms compensate employees for driving their own automobiles to meet with customers, perform business errands, attend professional events, and more now that the opportunity to deduct unreimbursed employee business costs is gone – at least until the 2025 tax year. Although it may appear to be a given, employees cannot deduct their commute, as appealing as it may be.
Depending on how you establish your reimbursement program, these mileage payments are tax-deductible for the company and may not be taxable for the employee.
The following are two prevalent methods for reimbursing employees for the usage of their own vehicles:

Allowance for one automobile is fixed.

You designate a predetermined sum, such as $500 per month, and pay it to all employees who use their vehicle on the job using a flat car allowance. Because you don't have to compute payments each month, this technique is simple. The allowance, however, is taxable income for the employee and subject to FICA taxes.

reimbursement for mileage You set a cents-per-business-mile rate (the IRS's standard mileage rate or another rate of your choice) and pay workers that rate multiplied by their actual business mileage each month if you pay a mileage reimbursement. Employee mileage reimbursements aren't taxable as long as 1) the mileage rate isn't greater than the IRS statutory mileage rate and 2) you maintain track of employee mileage.

Tax Season Tips in a Nutshell

Partners to Assist You with Year-End Closing and Tax Season Preparation

Deductions for mileage are made automatically.

Consult your finance or tax specialist for further information on assisting your staff with their business transportation expenditures.
The mileage tax deduction guidelines for self-employed employees and independent contractors specify that your deductible miles are determined by where your principal place of business is situated. If you work from home, each time you get in your car and travel for any reason linked to your business, all of your miles are usually deductible.

According to the IRS, if you drive to meet with a customer and then return home, the entire journey is considered business-related and so qualifies for a mileage deduction. Even if it's only dropping items off at the post office, you can deduct miles driving from your company site to work-related activities.
If you run your business from a place other than your home office, you can't deduct miles for the travel there since it counts as commuting.

Business vs. personal trips when claiming mileage
It goes without saying that you may only claim mileage for business purposes on your tax return, not mileage for personal reasons. Even though many of us require a daily dosage of caffeine to complete our jobs, commuting to and from work is considered a personal journey, as is that cup of coffee you stopped for on the way.





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Because many of us perform personal errands, such as picking up our dry cleaning or stopping at the grocery store, these mileage tax deduction requirements can make things confusing when it comes to mileage monitoring. We may be driving for business objectives at the same time.
Self-employed individuals and small company owners may easily distinguish between business and personal driving journeys using mileage monitoring applications, even if they are combined into the same trip.
Typically, these applications detect when you are driving and track your miles for you. The software will then categorize any trips you take as either work or personal.
It's Simple to Deduct Mileage
Simply download your FreshBooks mileage and cost tracking records and email them to your accountant or tax expert when it's time to prepare your taxes. When it comes to monitoring business miles and deductible costs for your tax return, this saves you a lot of time, money, and headache.

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