| My understanding is that Fleet Administration adds the total
of the $200/month payments to Box 10 on the employee's W-2
Form.
This is the worst possible place for Digital to report
the $200/month, because now the employee has to pay
taxes on it. You cannot subtract the $200/month from
your income because Form 2106 "Employee Business Expenses"
says "Do _not_ include any amounts that were reported to you
as wages in Box 10 of Form W-2." The only way you could
have subtracted the $200/month from your income is if
Digital had separately identified the $200/month on Form
W-2 as employee business expenses.
It seems to me that the best you can do on Plan B is to take
the difference between the IRS's allowed $0.255/mile and
the $0.08/mile that Digital gives you and use that as an
itemized deduction. However, the deduction for employee
business expenses is subject to the 2% floor: You can
only deduct that amount that exceeds 2% of your adjusted gross
income.
If someone knows a way that the Plan B $200/month can be
"adjusted" out from one's income, I would be very interested
in hearing how it can be done.
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| Well, I won't profess to be a Tax/Accounting expert, but I've been on Plan B
for almost six years now and have some experience with what goes on. Basically,
you have two choices:
1) Use the 22.5�/mile - fairly straight-forward method, but may not help you.
2) Calculate business expenses as a function of the percentage of business
miles.
I use #2 because it allows me to deduct x% (x% is calculated as Business Miles
divided by Total miles driven) of vehicle expenses. Valid expenses include:
a) Fuel charges
b) Maintenance
c) Insurance
d) Registration/Inspection Fees
e) Depreciation (different methods can be used to determine
depreciation.)
f) Others (I can't think of anything else off the top of head, but this
gives a general idea.)
Anyway, you need to get rid of the $2,400 that is added in box 10. Let's say
that you drove a total of 18,000 miles for the year. Of that, let's say that
6,000 miles were business (note that you *cannot* count commuting to primary
place of business as commuting mileage.) In this case, your percentage of
business use is 33.3%. That means to offset the $2,400, you need to have at
least $7,200 total vehicle expenses.
If you lease the vehicle as opposed to buying it, you may get some other
advantages, but I'm not real sure. My advice would be to find a good
accountant and talk it over with him/her. It is well worth it (and it's
still deductable!!!) Also, bear in mind that to use method #2, you will need
to keep every receipt *and* have some documentation available regarding your
business use of the vehicle in case you ever get audited. Again, an accountant
can help you with that.
I hope this is of some help.
Perry
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| re: .1
> This is the worst possible place for Digital to report
> the $200/month, because now the employee has to pay
> taxes on it.
This is where the IRS requires Digital to put it.
> If someone knows a way that the Plan B $200/month can be
> "adjusted" out from one's income, I would be very interested
> in hearing how it can be done.
I confirmed it with the IRS this morning. You _have_ to report your employee
business expense on Schedule A, Misc. Deductions section (subject to 2% AGI
floor). This is a change this year.
"No new taxes", eh? They just got a few hundred dollars more out of all of
us on Plan B!
Gerry
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