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2020 IRS Standard Mileage Rates | IRS Tax Lawyer & Attorney

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Beginning January 1, 2020, the IRS changed the optional standard mileage for the calculation of deductible costs of operating an automobile (sedans, vans, pickups and panel trucks) for business, charitable, medical or moving purposes. Let’s discuss in more detail these new 2020 IRS Standard Mileage Rates.

2020 IRS Standard Mileage Rates for Business Usage

For the tax year 2020, the business-use cost of operating a vehicle will be 57.5 cents per mile. This is half a cent lower from 2019. The standard mileage rate for business use is based on an annual study of the fixed and variable costs of operating an automobile.

As in previous years, a taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle.

2020 IRS Standard Mileage Rates for Medical and Moving Purposes

For the tax year 2020, the medical and moving cost of operating a vehicle will be 17 cents per mile. This is lower by three cents from 2019. The rate for medical and moving purposes is based on the variable costs.

2020 IRS Standard Mileage Rates for Charitable Purposes

For the tax year 2020, the costs of operating a vehicle in the service of charitable organizations will be 14 cents per mile. The charitable rate is set by statute and remains unchanged.

2020 IRS Standard Mileage Rates vs. Actual Costs vs. Miscellaneous Itemized Deductions

It is important to note that under the Tax Cuts and Jobs Act, taxpayers can no longer claim a miscellaneous itemized deduction for unreimbursed employee travel expenses. With the exception of active duty members of Armed Forces, taxpayers also cannot claim a deduction for moving expenses. Notice-2019-02.

However, taxpayers are not forced to use the standard mileage rates; rather, this is optional. Sherayzen Law Office advises taxpayers that they have the option of calculating the actual costs of using a vehicle rather than using the standard mileage rates. If the actual-cost method is chosen, then all of the actual expenses associated with the business use of a vehicle can be used: lease payments, maintenance and repairs, tires, gasoline (including all taxes), oil, insurance, et cetera.

IRS Notice 2020-05

IRS Notice 2020-05, posted on IRS.gov, contains the standard mileage rates, the amount a taxpayer must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that a taxpayer may use in computing the allowance under a fixed and variable rate plan. In addition, for employer-provided vehicles, the Notice provides the maximum fair market value of automobiles first made available to employees for personal use in calendar year 2020 for which employers may use the fleet-average valuation rule in § 1.61-21(d)(5)(v) or the vehicle cents-per-mile valuation rule in § 1.61-21(e).

Making Work Pay Credit

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Making Work Pay Tax Credit is a refundable tax credit of available to many taxpayers in the tax year 2010.  The credit is up to $400 for individuals and up to $800 for married taxpayers filing joint returns.  Taxpayers who file Form 1040 and 1040A must use Schedule M to figure out their Making Work Pay Tax Credit (in particular, whether they have already received the full credit in their paychecks).  Taxpayers who file Form 1040-EZ should use the worksheet for Line 8 on the back of the 1040-EZ to figure their Making Work Pay Credit.

There is an income limitation on claiming the tax credit.  If a taxpayer’s modified adjusted gross income is or exceeds $95,000 (for individuals) or $190,000 (if married filing jointly), then he is not eligible to take the credit.

Additional limitations also exist.  In particular, the credit is not available for a taxpayer: who is claimed as a dependent on someone else’s tax return, has not a valid social security number, or who is a nonresident alien.

Contact Sherayzen Law Office to discuss your case with an experienced Minneapolis tax attorney!

Tax Lawyers Minneapolis: Preparing for Initial Consultation II (for Individuals)

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In previous article, I discussed the first part of preparation for an initial consultation with Minneapolis tax lawyers; the first part was mainly concerned with what type of information you should bring to your Minneapolis tax attorney. In this essay, I shift the focus toward the second part of the preparation which is about what type of questions you need to ask your tax lawyer.

Usually, the questions that you want your tax attorney to answer should, at the very least, cover the following four areas:

1. Cost and Billing

One of most important areas that you need to cover is the cost of the case as well as the manner in which you will be billed. Unless this is a flat-fee case, you should not expect your attorney to give you a precise amount of money you will need to spend on your case. Usually, your tax lawyer will give you an estimate, which, in the end, may or may not correspond to the actual cost of the case. I usually provide a fairly conservative estimate and it is rare for my clients to pay above the estimate; usually, it occurs where a client fails to fully disclose the circumstances of the case or otherwise causes a significant delay in the proceedings of the case.

In terms of the manner of billing, you are likely to billed per hour in most tax litigation and voluntary disclosure matters. Regular tax returns, especially for returning clients whose circumstances have not changed in any significant way, are usually subject to a flat fee.

2. Time

The next area you should question your Minneapolis tax attorney about is how long the case will need to be conducted. The estimates here are likely to vary significantly. While it is fairly easy to predict when a tax return will be finished, it is much harder to estimate an amount of time a voluntary disclosure process may take (especially if more issues come up during the disclosure process).

3. Participation

Ask your Minneapolis tax lawyer about who will handle your case – i.e. whether the attorney will handle it personally or turn it over to his associates. When you are dealing with a large law firm, you run the risk that the attorney with whom you are having the initial consultation will not be the one handling your case, especially if you are a small business or an individual. Due to common division of labor in large law firms, it is very likely that the case will be turned over to inexperienced associates whose work will be only reviewed by the attorney who conducted the initial consultation.

If, however, you are hiring a small firm or a solo practitioner, you are very likely to avoid this problem and your case will be handled from the beginning through the end by your experienced tax lawyer who is probably an owner of the law firm and personally responsible for the case.

4. Percentage of Practice

Ask your Minneapolis tax lawyer about how much time per month, on the average, he devotes to his tax practice. At the very minimum, your tax attorney should devote about 25% of his practice to tax law. If, however, the attorney has specialized associates (for example, someone who is a lawyer and a CPA), then he can have a lower percentage devoted to tax law because he may work closely with his experienced and specialized associate.

Conclusion

While these four questions do not represent a complete list of questions you should ask your tax attorney, they are likely to provide that minimum background necessary for the review of a retainer agreement with your Minneapolis tax lawyer.

Sherayzen Law Office can help you with your tax issues, whether you want to check your tax return, negotiate with the IRS, or engage in complex tax planning.

Contact Sherayzen Law Office NOW to discuss your tax case with an experienced Minneapolis tax attorney!