Form 6198 At-Risk Limitations

[bbirder]

The mileage is an operating expense. Regardless of whether the truck has been depreciated. I don't have my taxes in front of me but I think I used a 5 year depreciation life on it. After depreciation, you can continue to deduct actual expenses or mileage. It is explained well in the Schedule F instructions

You're truck is >50%, or whatever the cutoff is, used for farm use? No appreciable personal/commuter use? Reason I ask is that I have been told, on a truck bought year before last, by two different tax preparers, was that if it was used more than a limited amount I could only count mileage, but if it was claimed as a "farm truck" it could be depreciated out over five but no mileage (at least until then). Curious as to what's going on and if I'm shorting myself, and need to find a third tax preparer lol
He has mine at 49.22% farm use.

I deduct mileage at the rate of 54 cents per mile for tax year 2016 on my Ford F-350 "farm truck". My sole occupation is farming. My "farm truck" is solely dedicated to the performance of that occupation. I do not use it to commute to an off-farm job. The truck has already been totally depreciated. Only mileage expenses are deducted this tax year. I don't deduct repairs, oil changes, insurance, license, or property tax.

In regard to depreciation. My reading of the Schedule F instructions indicates that depreciation does not exclude deducting operating expenses. They are separate functions. Depreciation allows you to "write off" the capital cost of the original purchase of your farm truck. Operating expenses allows you to deduct what it costs to operate the truck excluding the capital cost. You should clarify that with your tax preparer. But it does not make sense if you cannot. In my case, I am not doing both in the same year since my farm truck is beyond the depreciation period.

Margonme,
I hesitate to write this post, but feel that I owe it to the misinformed not to follow your advice. You would be well advised to seek the advice of professional in preparing your return. (even tho we all know that you are of far too much intelligence to stoop so low.)
I not only own a small farm, but have been in the income tax business for 31 years. To deduct mileage in lieu of actual expenses requires that you start using mileage the first year the vehicle is placed into service. While using mileage you are "NOT" allowed to depreciate the vehicle, because the IRS has that figured into the std mileage rate. There are only special circumstances that you are allowed to switch methods.

The following is taken from Pub17, Your Federal Income Tax.

The standard mileage rate is used in place of actual expenses. Taxpayers who choose the standard mileage rate may not deduct actual expenses, such as depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration fees.

If you elect to claim actual expenses , you cannot later switch to mileage after using up the Depreciation.

The tax laws go much deeper than this simple explanation, but I'll not go there. I am far too busy at this time of the year to argue with someone who interprets the law in there favor.

As I stated, I can only hope that others on this forum do not use your advice and get themselves into trouble with Big Brother. You will probably continue, and I don't really care. Do not answer me expecting a response. I have said my piece and I will not be drug into a debate. My clients will never get into the trouble you are creating. Have a good evening!

 

[Nesikep]

I don't know how it is for you, but if you depreciate a piece of equipment, then subsequently sell it, the money of the sale is considered income

bbirder, what you say does make 'sense' to me, though tax laws making sense is a bit of an oxymoron..

Around here, we will omit expenses once in a while to deliberately show some profit.. a place that is continually in the red could get classified as a hobby farm and the can of worms that opens.. higher property tax rates etc.
Being honest, I think 2015 was the first year since we got out of vegetables that we shows a profit.. with nearly $2k per weaned calf, that certainly goes a long way... We have no debt, so we can do with very little if we're careful about expenses

 

[wbvs58]

When I sold my business almost 10 years ago now I decided I'd had enough of keeping financial records and that I just wanted to disappear off the planet as far as the tax man goes and to just operate as a hobby and yet while I may get a lump sum of money back when I sell stock I know that my expenses will be much greater. We have a goods and service tax here of 10% on everything you buy, if I was registered for the GST I would be able to get back all the 10% I pay on my purchases from the government but I look upon it as my ongoing contribution to the countries income and I disappear off the planet and I'm happy.

Ken

 

[True Grit Farms]

When I sold my business almost 10 years ago now I decided I'd had enough of keeping financial records and that I just wanted to disappear off the planet as far as the tax man goes and to just operate as a hobby and yet while I may get a lump sum of money back when I sell stock I know that my expenses will be much greater. We have a goods and service tax here of 10% on everything you buy, if I was registered for the GST I would be able to get back all the 10% I pay on my purchases from the government but I look upon it as my ongoing contribution to the countries income and I disappear off the planet and I'm happy.

Ken

Sure wish the crooks would implement a service tax here. But then our new president and all the politicians wouldn't have any loopholes to get out of paying their fair share.

 

[Margonme]

You're truck is >50%, or whatever the cutoff is, used for farm use? No appreciable personal/commuter use? Reason I ask is that I have been told, on a truck bought year before last, by two different tax preparers, was that if it was used more than a limited amount I could only count mileage, but if it was claimed as a "farm truck" it could be depreciated out over five but no mileage (at least until then). Curious as to what's going on and if I'm shorting myself, and need to find a third tax preparer lol
He has mine at 49.22% farm use.

I deduct mileage at the rate of 54 cents per mile for tax year 2016 on my Ford F-350 "farm truck". My sole occupation is farming. My "farm truck" is solely dedicated to the performance of that occupation. I do not use it to commute to an off-farm job. The truck has already been totally depreciated. Only mileage expenses are deducted this tax year. I don't deduct repairs, oil changes, insurance, license, or property tax.

In regard to depreciation. My reading of the Schedule F instructions indicates that depreciation does not exclude deducting operating expenses. They are separate functions. Depreciation allows you to "write off" the capital cost of the original purchase of your farm truck. Operating expenses allows you to deduct what it costs to operate the truck excluding the capital cost. You should clarify that with your tax preparer. But it does not make sense if you cannot. In my case, I am not doing both in the same year since my farm truck is beyond the depreciation period.

Margonme,
I hesitate to write this post, but feel that I owe it to the misinformed not to follow your advice. You would be well advised to seek the advice of professional in preparing your return. (even tho we all know that you are of far too much intelligence to stoop so low.)
I not only own a small farm, but have been in the income tax business for 31 years. To deduct mileage in lieu of actual expenses requires that you start using mileage the first year the vehicle is placed into service. While using mileage you are "NOT" allowed to depreciate the vehicle, because the IRS has that figured into the std mileage rate. There are only special circumstances that you are allowed to switch methods.

The following is taken from Pub17, Your Federal Income Tax.

The standard mileage rate is used in place of actual expenses. Taxpayers who choose the standard mileage rate may not deduct actual expenses, such as depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration fees.

If you elect to claim actual expenses , you cannot later switch to mileage after using up the Depreciation.

The tax laws go much deeper than this simple explanation, but I'll not go there. I am far too busy at this time of the year to argue with someone who interprets the law in there favor.

As I stated, I can only hope that others on this forum do not use your advice and get themselves into trouble with Big Brother. You will probably continue, and I don't really care. Do not answer me expecting a response. I have said my piece and I will not be drug into a debate. My clients will never get into the trouble you are creating. Have a good evening!

Thank you. If you read carefully I was responding to questions - not advising or even suggesting how someone else should file their taxes. My responses are honest if inaccurate. Tax mistakes are just that - mistakes. I have always used actual mileage. If depreciation is not permitted, then the $5,000 value of it was depreciated inappropriately. That was the amount I depreciated over 5 years. It was purchased used in 2010. I do appreciate your information.

 

[talltimber]

You're truck is >50%, or whatever the cutoff is, used for farm use? No appreciable personal/commuter use? Reason I ask is that I have been told, on a truck bought year before last, by two different tax preparers, was that if it was used more than a limited amount I could only count mileage, but if it was claimed as a "farm truck" it could be depreciated out over five but no mileage (at least until then). Curious as to what's going on and if I'm shorting myself, and need to find a third tax preparer lol
He has mine at 49.22% farm use.

I deduct mileage at the rate of 54 cents per mile for tax year 2016 on my Ford F-350 "farm truck". My sole occupation is farming. My "farm truck" is solely dedicated to the performance of that occupation. I do not use it to commute to an off-farm job. The truck has already been totally depreciated. Only mileage expenses are deducted this tax year. I don't deduct repairs, oil changes, insurance, license, or property tax.

In regard to depreciation. My reading of the Schedule F instructions indicates that depreciation does not exclude deducting operating expenses. They are separate functions. Depreciation allows you to "write off" the capital cost of the original purchase of your farm truck. Operating expenses allows you to deduct what it costs to operate the truck excluding the capital cost. You should clarify that with your tax preparer. But it does not make sense if you cannot. In my case, I am not doing both in the same year since my farm truck is beyond the depreciation period.

Margonme,
I hesitate to write this post, but feel that I owe it to the misinformed not to follow your advice. You would be well advised to seek the advice of professional in preparing your return. (even tho we all know that you are of far too much intelligence to stoop so low.)
I not only own a small farm, but have been in the income tax business for 31 years. To deduct mileage in lieu of actual expenses requires that you start using mileage the first year the vehicle is placed into service. While using mileage you are "NOT" allowed to depreciate the vehicle, because the IRS has that figured into the std mileage rate. There are only special circumstances that you are allowed to switch methods.

The following is taken from Pub17, Your Federal Income Tax.

The standard mileage rate is used in place of actual expenses. Taxpayers who choose the standard mileage rate may not deduct actual expenses, such as depreciation, lease payments, maintenance and repairs, gasoline (including gasoline taxes), oil, insurance or vehicle registration fees.

If you elect to claim actual expenses , you cannot later switch to mileage after using up the Depreciation.

The tax laws go much deeper than this simple explanation, but I'll not go there. I am far too busy at this time of the year to argue with someone who interprets the law in there favor.

As I stated, I can only hope that others on this forum do not use your advice and get themselves into trouble with Big Brother. You will probably continue, and I don't really care. Do not answer me expecting a response. I have said my piece and I will not be drug into a debate. My clients will never get into the trouble you are creating. Have a good evening!

Thanks for your input. That's how I understood it as explained to me. I use mine to commute to off farm work, more than half the miles, so I just log my mileage when it pertains to farm use. On one hand, I'd like to be able to depreciate it, but on the other hand, I normally keep a truck so long I'll come out ahead if it doesn't require expensive repairs.

Nesikep, I think here if you depreciate equipment over five years, but sell it before five, then you owe back what's been depreciated out on it to date as well.

 

[True Grit Farms]

Thank you. If you read carefully I was responding to questions - not advising or even suggesting how someone else should file their taxes. My responses are honest if inaccurate. Tax mistakes are just that - mistakes. I have always used actual mileage. If depreciation is not permitted, then the $5,000 value of it was depreciated inappropriately. That was the amount I depreciated over 5 years. It was purchased used in 2010. I do appreciate your information.[/quote]

You have no worries Ron. The IRS auditors are a bunch of pussy cats, nothing like the a holes the EPA sends after you.

 

[Margonme]

Thank you. If you read carefully I was responding to questions - not advising or even suggesting how someone else should file their taxes. My responses are honest if inaccurate. Tax mistakes are just that - mistakes. I have always used actual mileage. If depreciation is not permitted, then the $5,000 value of it was depreciated inappropriately. That was the amount I depreciated over 5 years. It was purchased used in 2010. I do appreciate your information.

You have no worries Ron. The IRS auditors are a bunch of be nice cats, nothing like the a holes the EPA sends after you.[/quote]



This would not be my first tax mistake. They are pretty good at catching them.

 

[Margonme]

Preface: I am not advising anyone to do this:

A friend of mine who was an employee of the State of Montana. His wife also worked outside the home.

He had a couple bird dogs he used to write off expenses as a dog breeder. If he bought a garden hose, he wrote it off against the breeding business. Over a period of 5 years his dog business was showing a huge loss - and there were only two dogs.

He finally got caught. After he met with the IRS, I ask him how it went. He said fine. He just had to go back and work harder at it.

 

[skyhightree1]

[ But I also think its wise to tell the youngster that it aint so simple as haul a load of 20 calves and whatever you bring home is profit and let's be honest, that's what most of us thought when we got in it.

:tiphat:

 

[bbirder]

One more Thought:

We all swear we want to pay the taxes we owe, BUT if someone shows us how to reduce them (even if it is illegal per the IRS) we will gladly follow that path.

Remember this saying in the World situation we are in and determine where you want to be on Judgement day. ( I added that in but am not religious)

We have too many people riding in the wagon, instead of pulling it. Where do you fall in this parameter?

Think about it!

 

[T-Wacker]

Back to the original question, does anyone doing their own taxes file Form 6198? I usually have my taxes done by a preparer, but they have been telling me for years that the way I supply them the information, I could do them myself. The preparer apparently didn't in the past, or didn't give me a copy, so I am a bit confused.

 

[M-5]

One more Thought:

We all swear we want to pay the taxes we owe, BUT if someone shows us how to reduce them (even if it is illegal per the IRS) we will gladly follow that path.

Remember this saying in the World situation we are in and determine where you want to be on Judgement day. ( I added that in but am not religious)

We have too many people riding in the wagon, instead of pulling it. Where do you fall in this parameter?

Think about it!

A Shetland pony will put as much effort in to pulling as a Clydesdale. the amount of movement is relative to the load . a person that pays one dollar pays more that 48% .

 

[TexasBred]

One more Thought:

We all swear we want to pay the taxes we owe, BUT if someone shows us how to reduce them (even if it is illegal per the IRS) we will gladly follow that path.

Remember this saying in the World situation we are in and determine where you want to be on Judgement day. ( I added that in but am not religious)

We have too many people riding in the wagon, instead of pulling it. Where do you fall in this parameter?

Think about it!

I see absolutely nothing wrong with taking "real" deductions, things that represent actual expenses of the operation. We are expected to take them. I'm sure like so many things, the amount of the anticipated deductions are build into the tax tables. Scripture says "render unto Caesar what is Caesar's. Not one dime more or less. I feel good about where I stand on judgement day.

 

[M-5]

One more Thought:

We all swear we want to pay the taxes we owe, BUT if someone shows us how to reduce them (even if it is illegal per the IRS) we will gladly follow that path.

Remember this saying in the World situation we are in and determine where you want to be on Judgement day. ( I added that in but am not religious)

We have too many people riding in the wagon, instead of pulling it. Where do you fall in this parameter?

Think about it!

I see absolutely nothing wrong with taking "real" deductions, things that represent actual expenses of the operation. We are expected to take them. I'm sure like so many things, the amount of the anticipated deductions are build into the tax tables. Scripture says "render unto Caesar what is Caesar's. Not one dime more or less. I feel good about where I stand on judgement day.

I concur and will add one more thing. If you abide by the law and use the deductions how can that construed as not paying your fair share. If you think I don't pay enough then change the law. I will use every single deduction that is legal. Im more concerned with the ones stealing my tax money when they didn't contribute.

 

[skyhightree1]

One more Thought:

We all swear we want to pay the taxes we owe, BUT if someone shows us how to reduce them (even if it is illegal per the IRS) we will gladly follow that path.

Remember this saying in the World situation we are in and determine where you want to be on Judgement day. ( I added that in but am not religious)

We have too many people riding in the wagon, instead of pulling it. Where do you fall in this parameter?

Think about it!

I see absolutely nothing wrong with taking "real" deductions, things that represent actual expenses of the operation. We are expected to take them. I'm sure like so many things, the amount of the anticipated deductions are build into the tax tables. Scripture says "render unto Caesar what is Caesar's. Not one dime more or less. I feel good about where I stand on judgement day.

I concur and will add one more thing. If you abide by the law and use the deductions how can that construed as not paying your fair share. If you think I don't pay enough then change the law. I will use every single deduction that is legal. Im more concerned with the ones stealing my tax money when they didn't contribute.

Sure wish there was a like button for those 2 last posts. :tiphat: :tiphat: :tiphat: :tiphat:

 

[TexasBred]

I concur and will add one more thing. If you abide by the law and use the deductions how can that construed as not paying your fair share. If you think I don't pay enough then change the law. I will use every single deduction that is legal. Im more concerned with the ones stealing my tax money when they didn't contribute.

Ain't that the gospel truth !!!!

 

[bbirder]

I concur and will add one more thing. If you abide by the law and use the deductions how can that construed as not paying your fair share. If you think I don't pay enough then change the law. I will use every single deduction that is legal. Im more concerned with the ones stealing my tax money when they didn't contribute.

Ain't that the gospel truth !!!!

Hopefully no one misinterpreted my meaning. I am ALL for taking Legal deductions and getting the largest refund you are legally entitled to. I am only concerned with someone who without the proper training reads the Tax Law, and then rereads the Tax law over and over, until they can justify that it reads they can take that deduction. They feel all good about themselves for doing well so they tell all their friends about their broad knowledge. The friends unknowingly get themselves in trouble by using advice from the internet! People who file correctly are considered by myself as pulling the wagon.

And I want to add! My office has only filed maybe 3 form 6198's in the past 15 yrs. Again, most people on this forum from what I know do not need to file this form.
I could write a book (and might one day) about correcting tax returns self prepared by the taxpayer that just put them deeper in debt. I had a client show up begging me to help him because he owed over $7000 and couldn't pay it. When I told him I would need to see a copy of his return, he whipped out his phone and said I have it right here. 138 pages of every form imaginable. After spending some educational time with him about using phones to file your taxes I redid his return correctly and he received a refund of $2700. Well worth the fee I charged him.