IRS audit help

[adamh]

I am being audited for my off road fuel tax......

Fuel has a road tax added to it. Since our TMS burn fuel but not on the road, we can deduct the fuel tax that we paid per gallon of gas.

I need proof that a XX hp Kohler burns XX per gallon at max load per hour. Even a round about would be good. I have been all over Kohlers and Briggs website and can't find any documentation on the subject and when I call them direct they act like they have never been asked that question before and have no clue how to help me.

The IRS just told me I need some official documentation from a manufacturer of the machine or engine that explains how much fuel per hour is consumed.

Can anyone help me?

I have 3 machines in question.
Powerclean is out of businesses. ...no help
Blueline is out of business and SS won't help.......
Prochem has nothing on their website and can't get an engineer to return a call.........

 

[FredC]

Will this work?

http://www.serwishonda.pl/vanguard/pdf/Vanguard_poziome.pdf

 

[Charlie Lyman]

6 liters is 1.585 GPH (21hp)
9 liters is 2.38 GPH (23hp)
That is using what Fred posted.

 

[D Luke]

This gets complicated.

First you need to track your weighted average price paid per gallon of fuel for the year. Easy with an Excel formula.

Total hours on machine for the year need to be tracked.

Your mpg in the van for the year also needs to be tracked, hopefully per trip computer.

Total mileage on the van is obviously tracked.

Say you bought 1,500 gallons of gas at a weighted average of $2.25 per gallon and your mpg was 16. Total miles on van was 10,000. Total hours on the machine was 500.

That would mean your machine burned 875 gallons of fuel at a rate of 1.75 gallons per hour.

What this all means is you can deduct the 875 gallons of road tax but, more importantly, you can deduct 875 gallons at a weighted average price of $2.25 per gallon above and beyond your standard mileage.

This is unimpeachable at audit, but obviously takes a bit of work to keep straight.

 

[adamh]

Fred
This is exactly what I needed. Thank you very much.

 

[bob vawter]

excuse me Adam........isn't it up to THEM to prove YOUR figures are wrong.......
i'm familiar wit this particular subject as i ran a Big Red Diesel unit for 20 years and encountered the very same problem...give 'em your figures and tell 'em to pound sand......

 

[D Luke]

excuse me Adam........isn't it up to THEM to prove YOUR figures are wrong.......
i'm familiar wit this particular subject as i ran a Big Red Diesel unit for 20 years and encountered the very same problem...give 'em your figures and tell 'em to pound sand......

Not up to them to do anything. When it comes to your deductions you need to prove it or lose it.

Not a fan of the IRS or anything, but they wield a ton of power in an audit.

No use getting mad at them though like everyone seems to do. They really only have the power that Congress gives them.

 

[bob vawter]

if you show up at yor audit wit TWO garbage bags......
one wit invoices and the other wit receipts

yor auditor will chit bricks to get you out of his cubicle as quickly as possible

 

[D Luke]

Not great advice, and not really how it works. Lots of misconceptions about audits and tax enforcement out there.

 

[bob vawter]

great advice from my book keeper whom went with me......the whole thing lasted a half an hour

 

[bob vawter]

this was prolly over twenty years ago(only time)..the DA put his hand over his eyes and reached into the receipts bag and pulled out a receipt for a 50' garden hose.......takes a long look at it and says...
"OK...why would a carpet cleaner need a 50' piece of garden hose....?"
sooooo i told him...and i could tell he was a little embarrassed that he missed that one!

So once more he puts his hand over his eyes, reaches in and pulls one out for an extension ladder....
UMMMM......extension ladder huh..."jus why would a carpet cleaner need a 15' extension ladder to clean carpets"
When i told him that once in a while i have a ceiling litebulb burn out......our audit was purty much over!

 

[Mark Saiger]

One of my Audits actually went very well, because I came in with everything in filed order of what they asked for, including with a print out of the ledger from QuickBooks, and I had a list of what page on the ledger we would find the info wanted...

The lady at the audit says "this is going to go just fine.....I like an organized man!"

It cost me $250 to the government (because they have to go home with something some days) and my accountant cost me $1000

The lady from the IRS still asks about me when she sees my accountant at conventions I guess....even now she is retired and has still asked about me.

So, two ranges of concepts...go in and dump everything on the table, or come in organized as much as can be and hope for a merciful audit

It's not fun have a Federal IRS agent sitting in your home office with you I can tell you.....had that too....

The State of MN is one of the toughest on Audits though

 

[KevinD]

I always loved my dual tank Ford vans for this reason.
No guesswork. One tank for the van and the other for the TM.

 

[GeneMiller]

Same here. Totally separate tank. No guessing. One burns diesel and the other one gas.

Gene

 

[rwcarpet]

What is the advantage of using an off road tax credit? I take total gallons bought for van, take the hours used x 1.5 gal = total fuel for TM. The balance goes toward van fuel expense. All documented, of course. All fuel purchased during the year is accounted for either in TM use or van use. All is a business deduction.

 

[D Luke]

What is the advantage of using an off road tax credit? I take total gallons bought for van, take the hours used x 1.5 gal = total fuel for TM. The balance goes toward van fuel expense. All documented, of course. All fuel purchased during the year is accounted for either in TM use or van use. All is a business deduction.

You get the road tax you paid at the pump refunded to you since the fuel was used off road. Something like $.20 a gallon or so from the Feds. It can add up.

 

[rwcarpet]

You get the road tax you paid at the pump refunded to you since the fuel was used off road. Something like $.20 a gallon or so from the Feds. It can add up.

Problem is.....it also added up to closer IRS attention. Any direct tax credit is going to draw attention to your return.

 

[Doug Cox]

This gets complicated.

First you need to track your weighted average price paid per gallon of fuel for the year. Easy with an Excel formula.

Total hours on machine for the year need to be tracked.

Your mpg in the van for the year also needs to be tracked, hopefully per trip computer.

Total mileage on the van is obviously tracked.

Say you bought 1,500 gallons of gas at a weighted average of $2.25 per gallon and your mpg was 16. Total miles on van was 10,000. Total hours on the machine was 500.

That would mean your machine burned 875 gallons of fuel at a rate of 1.75 gallons per hour.

What this all means is you can deduct the 875 gallons of road tax but, more importantly, you can deduct 875 gallons at a weighted average price of $2.25 per gallon above and beyond your standard mileage.

This is unimpeachable at audit, but obviously takes a bit of work to keep straight.

If you're calculating a fuel write-off, why do you need any more than the number of hours your machine(s) have run in the calendar year? Isn't it number of hours run X 5.o percent (sales tax) per gallon of fuel used. My Powerclean used 2.5 gallons of fuel and ran about 1200 hours a year. Not a big challenge. Isn't it only a matter of a few hundred bucks? Why not forego it instead of taking the claim? And what loser only does 875 hours in a year? Nevermind, I forgot about all of you guys. lol

 

[D Luke]

If you're calculating a fuel write-off, why do you need any more than the number of hours your machine(s) have run in the calendar year? Isn't it number of hours run X 5.o percent (sales tax) per gallon of fuel used. My Powerclean used 2.5 gallons of fuel and ran about 1200 hours a year. Not a big challenge. Isn't it only a matter of a few hundred bucks? Why not forego it instead of taking the claim? And what loser only does 875 hours in a year? Nevermind, I forgot about all of you guys. lol

Like I said, it's complicated, but if you really want to be bored with the ins and outs of the Federal Tax System as it relates to small business in general, and carpet cleaners in particular, then I'm your guy.

First off, it's not sales tax, it's road tax. Totally different things. Yes, for the road tax rebate all you need is hours on machine x gallons per hour. 875 hours (which is obviously just for the sake of example, but probably close to what a lot of guys put on) x 1.75 gph=1,531 gallons.

Off the top of my head I think the Federal road tax rebate is $.23 per gallon or something close. That equates to about $350 in free money, take it or don't, I DGAS.

Where it gets tricky, is deducting your TM fuel expense above and beyond your standard mileage deduction. For that you need all of the info I talked about above. No way to do it accurately without a WEIGHTED average price per gallon.

In my example you would deduct about $5,500 for your standard mileage, but what I assume most guys miss out on, is the extra $4,210 in fuel expense deduction from gas consumed by your TM if your weighted average price per gallon was $2.75.

Assuming a (conservative) 40% marginal tax rate (including Self-Employment and State Income Taxes) that equates to $1,684 in your pocket.

Add the $350 from the road tax refund and a guy grossing $125k (or whatever) just put another $2,000 in his pocket. For free.

Like I said, take it or don't, doesn't matter to me.

 

[Jim Williams]

With the IRS you are guilty until proven innocent. I have had to deal with those scoundrels a few times when I got behind on my taxes while trying to feed my family. Like my grandad use to say. "You don't want to owe those bastards money."