Apr 13, 2009

Worried About My Tax Return

Just as a special report on the news warned that the IRS is going to be closely watching - and possibly auditing - anyone who files their returns online I was... filing my return on line. While I don't think I'm going to end up in jail, I am very nervous about potential costs if my understanding of the rules isn't quite accurate.

2008 was my first (and possibly last) year as a self-employed individual. The most confusing part of the return has to do with the mileage expenses. I worked a bunch of different jobs last year, and over the year the main one grew into one that required, in my contract, for me to be at the office 4 days per week. So - I assume it's ok to take that as a mileage deduction. I also deducted - guesstimated - my mileage to and from a few other clients who are further away from my office.

Then I read the fine print - you aren't allowed to take a deduction on transit to your office if it's away from home. But - my office was my home, I just didn't take a home office deduction because I lived in a studio and worked from my bed. But I could do all of my work from my bed (as a freelance writer) and did not need to travel to accomplish this work 4 days per week. I went into the office for meetings, and just because my contract said I had to be there. I'm not sure anyone has a record of how often I was actually in the office, but I do have proof that for at least 1/2 of 2008 I was required to commute 4 days per week.

But then that's what confuses me about the fine print - it says if your office is away from your home, you cannot deduct mileage to drive to this office. So am I not allowed to deduct these expenses? Or does this mean only if you pay for your office away from home and deduct that separately? Ugh.

I really hope I don't get audited but I have a bad feeling about this year. I reported all of my income and interest, it's just the deductions that could possibly screw me over.

In related "potentially screw me over" news -- I transferred the funds to cover my $14k tax payment from ING to Bank of America on Friday, but it hasn't arrive in my BoA account yet. Here's to hoping it will show up by April 15, when TurboTax will be removing the funds from my account. (ING said it takes 2 business days so it should be there tomorrow, fingers crossed.)

Happier news - it looks like I managed to save about $15k last year beyond taxes. Which may end up going to a lawyer and tax accountant to deal with an audit, if they want to fight me on my mileage deduction. I'm scurred.



3 comments:

FrugalBeagle said...

I'm not a tax expert but the way I read the above language here is how I see it. You can't deduct mileage to travel to your office if that is one you rent for the purpose of being your office. If you work from home but are required to go to another office site you can deduct the mileage because it is not your main office.
As long as you have the documentations showing what was required of you, I think you would be fine in the event of an audit.
I think they are going to be looking more for more than one person claiming the same dependent, not claiming earned income etc.

Rini said...

It seems to me that being required to do "contractor" work from an office would be no different than being required to do "employee" work from an office... which is, of course, not deductible. But if I were you, I'd send an email to Kelly via www.taxgirl.com - she can give you a tax professional's insight and let you know whether you need to make a correction.

her every cent counts said...

@Rini that's why I'm confused. On one hand, what you said makes perfect sense. On the other hand, the full definition of a contractor is that you have total control of how your work is done. Without this control you are an employee, which means you have reduced taxes. But I was considered and independent contractor, so I think I should be able to deduct this. I will email taxgirl to find out, thanks.

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