Business Car Deduction - Some important points

If you have a business that is a separate legal entity from you, the business may not pay your personal expenses and you personally may not pay the business’s expenses. To this extent, the payments made by the business for your personally owned car should be classified a loan to you.
From there, your business is going to reimburse you for business vehicle expenses one of two methods:

• It can reimburse you at the IRS standard mileage rate;  OR
• It can reimburse you for actual expenses

Regardless of the reimbursement method, you need to send proof of the business mileage and all expenses you need to be reimbursed, to your business.

Depreciation expenses for the vehicle may only be deducted by the business if the business owns the title for the vehicle used. You may not deduct depreciation for the vehicle, nor may he deduct fuel, insurance, lease payments or repairs to the vehicle on your personal income tax return, regardless of the percentage the car is used for business purposes.

So, If the business owns the car, it can fully deduct car expenses, subject to dollar limits on depreciation, against its business income. If you, as an employee or shareholder, own the car and use it for business, your expenses are deductible as a miscellaneous itemized deduction to the extent they exceed 2% of your adjusted gross income. And even this deduction may be further limited by the overall reduction in itemized deductions.

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Installments - What you need to know

If you are unable to pay the full amount of tax owed, you may request a monthly installment plan.

Before applying for any payment agreement, a taxpayer must file all required tax returns.

Installment agreements generally provide up to 72 months to pay the tax. In certain circumstances, the payment period could be longer or the amount agreed to could be less than the amount of tax owed.

An installment plan is not valid unless accepted by the IRS. However, if a taxpayer owes $10,000 or less and meets certain other criteria*, the IRS must accept the request.

To request an installment agreement a taxpayer can attach Form 9465 - Installment Agreement Request to the front of his tax return, or in cases where the return is already filed-mail it directly to the IRS.

If the balance due is not more than $50,000, the taxpayer can apply online for a payment agreement instead of filing Form 9465.

If the IRS approves a request, they send a notice detailing the terms of the agreement and request a fee.

If a taxpayer is able to pay the full amount owed within 120 days, he should not request an installment agreement on Form 9465.

If the total amount the taxpayer owes is greater than $25,000 but not more than $50,000, the taxpayer may use a slightly expanded Form 9465-FS - Installment Agreement Request.

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What is an ITIN?

An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the IRS upon receipt of Form W-7.  Each ITIN is a nine-digit number that always begins with the number nine.

Who Must Apply?

IRS issues ITINs to foreign nationals and others who have federal tax reporting or filing requirements and do not qualify for SSNs. A non-resident alien individual not eligible for a SSN who is required to file a U.S. tax return only to claim a refund of tax under the provisions of a U.S. tax treaty needs an ITIN.
   • A nonresident alien required to file a U.S. tax return
   • A U.S. resident alien (based on days present in the United States) filing a U.S. tax return
   • A dependent or spouse of a U.S. citizen/resident alien
   • A dependent or spouse of a nonresident alien visa holder

What documents are acceptable as proof of identity and foreign status?

IRS streamlined the number of documents the agency accepts as proof of identity and foreign status to obtain an ITIN. There are 13 acceptable documents. Each document must be current and contain an expiration date. IRS will accept documents issued within 12 months of the application if no expiration date is normally available.  Documents must also show your name and photograph, and support your claim of foreign status. Below is the list of the only acceptable documents:

• Passport (stand alone document)
• National identification card (must show photo, name, current address, date of birth, and expiration date)
• U.S. driver's license
• Civil birth certificate (required for dependents under 18 years of age)
• Foreign driver's license
• U.S. state identification card
• Foreign voter's registration card
• U.S. military identification card
• Foreign military identification card
• Visa
• U.S. Citizenship and Immigration Services (USCIS) photo identification
• Medical records (dependents only - under 6)
• School records (dependents only - under 14, under 18 if a student)

A valid (unexpired) passport is the only stand-alone document to prove both identity and foreign status.
Reminder, all documents must be original documents or certified copies by the issuing agency. 

Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless an exception applies.

An ITIN does not authorize work in the U.S. or provide eligibility for Social Security benefits or the Earned Income Tax Credit.

 We can help you to get your ITIN number. 

contact@officetaxservices.com

(858)247-1680