Sunday, May 30, 2010

Deductions in a Fifth Wheel

June,

My husband is an Union Electrician and I am a self-employed JAMMON (jack of many – master of none) who works from home with my S-Corp – run solely by myself with the occasional help from a consultant. Due to the lack of construction work in the Indianapolis area (the last 18 months) we recently sold EVERYTHING that we owned, purchased a fifth wheel and will travel the country following work that my husband can obtain with the IBEW (International Brotherhood of Electrical Workers). I will continue to work from the fifth wheel as all I need to operate is a computer and cell phone (I do bookkeeping, graphic design, data analysis, high level admin, etc).

We would like to maximize our write-offs and albeit we don’t have many expenses these days aside from a fifth wheel payment, campground fees, cell phone and internet – we want to maximize.

I will be writing off my cell phone and internet as well as other office supplies and operating expenses, but what about other expenses such as the fifth wheel payment and its maintenance costs? Campground fees?

Mileage for my husband from the fifth wheel to his job site and back? Me from the fifth wheel to my clients and back (provided I am in the same State as my client at the moment),

What about items purchased for the fifth wheel such as storage bins, baskets, lawn chairs, propane, etc?


Any advise you give for the travel employee / traveling small business owner would be greatly appreciated.

My husband has associated with many other traveling electricians who write EVERYTHING off, but our small town accountant isn’t on the same page.

J What can we do? Thanks!

Courtney


Dear Courtney,

Generally I don't advise corporations via my blog, however, since much of what you ask applies to a lot of indies I'll see what I can do here to help you out.


If you live out of your fifth wheel [trailer or camper hooked to your vehicle] you must allocate any deduction for its use the same way you would for any home office -- exclusive use on a regular basis. Read these posts home office or studio . All supplies for the running an maintenance of the fifth wheel would be governed by the home office rules.

Supplies exclusively for your business, such as storage bins, would be 100% deductible.

Since you move around all the time I would allow only mileage from one business location to another. That means if you can establish a home office in the fifth wheel then driving from it to a client would be business miles. Here's some auto expense posts expenses -- auto-transportation .


If you pretty much stay in once place and move only when a job comes up, read these posts for possible deductions temporary worksite .

Hope that helps. And don't write-off "EVERYTHING." That doesn't go over well with the guys at the IRS. And, if you know better they may look at it as fraud.

BTW -- I also hope that your small town accountant had a really good reason to have you complicate your life by forming an S-corp.

Happy Trails!
June

2 comments:

Timothy said...

June, thanks for your blog. I've been a tax pro for 5 years, and I've learned a ton from you. The tax code, especially when it comes to indies, is brutal.

One thing I would add is the different state, county and city taxes they might have to pay for earning income in those areas. I'm in Florida, so I have very limited experience with the different state's tax laws. The federal return can affect the state return, and vice-versa. I really hope they keep very accurate records.

June Walker said...

You are correct, Timothy. I should have alerted Courtney to state tax implications.

I do have several posts on taxes required when income is earned in a non-resident state. Thanks for reminding me.

Glad you're learning from my writing. Please pass the word. With the economic shift more & more W2 people are becoming indies and the accounting profession lags behind in understanding how to work with self-employeds.

Accurate records !! Now that's what we need to work on. Please take a look at my new recordkeeping pub -- The Confident Indie: Five Easy Steps. Since you're a fellow tax pro, I'll send you a copy if you like.

-- June