2017 Standard Mileage Rates
Business, Charitable, Medical and Moving Rates
Important Considerations for 2017
Switching Between the Actual Expense and the Standard Mileage Rate Methods
Employer Reimbursements
Special Allowances for SUVs
As it does every year, the Internal Revenue Service recently announced the inflation- adjusted 2017 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2017, the standard mileage rates for the use of a car (or a van, pickup or panel truck) are:
53.5 cents per mile for business miles driven (including a 25-cent-per-mile allocation for depreciation). This is down from 54.0 cents in 2016;
17 cents per mile driven for medical or moving purposes. This is down from 19 cents in 2016; and
14 cents per mile driven in service of charitable organizations.
The standard mileage rate for a business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs as determined by the same study. The rate for using an automobile while performing services for a charitable organization is statutorily set (it can only be changed by congressional action) and has been 14 cents for over 15 years.

Important Consideration: The 2017 rates are based on 2016 fuel costs, which were at a historic low. On top of that, OPEC has decided to cut production in an effort to drive up fuel costs. The Automobile Club has predicted an increase in fuel prices in the near future. Based on the potential for substantially higher gas prices in 2017, it may be appropriate to consider switching to the actual expense method for 2017, or at least keeping track of the actual expenses, including fuel costs, repairs, maintenance, etc., so that option is available for 2017.

Taxpayers always have the option of calculating the actual costs of using their vehicle for business rather than using the standard mileage rates. In addition to the potential for higher fuel prices, the extension of the bonus depreciation though 2019 may make using the actual expense method a worthwhile consideration in the first year the vehicle is placed in service. The bonus depreciation allowance adds an additional $8,000 to the maximum first-year depreciation deduction of passenger vehicles and light trucks that have an unloaded gross vehicle weight of 6,000 pounds or less.

However, the standard mileage rates cannot be used if the actual method (using Sec. 179, bonus depreciation and/or MACRS depreciation) has been used in previous years. This rule is applied on a vehicle-by-vehicle basis. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles simultaneously.

Employer reimbursement – Where employers reimburse employees for business-related car expenses using the standard mileage allowance method for each substantiated employment-connected business mile, the reimbursement is tax-free if the employee substantiates to the employer the time, place, mileage and purpose of employment-connected business travel.

Employees whose actual employment-related business mileage expenses exceed the employer’s reimbursement can deduct the difference on their income tax return as a miscellaneous itemized deduction subject to the 2%-of-AGI floor. However, an employee who leases an auto and is reimbursed using the mileage allowance method can’t claim a deduction based on actual expenses unless he does so consistently beginning with the first business use of the auto.

Faster Write-Offs for Heavy Sport Utility Vehicles (SUVs) – Many of today’s SUVs weigh more than 6,000 pounds and are therefore not subject to the luxury auto depreciation limit rules; taxpayers with these vehicles can utilize both the Section 179 expense deduction (up to a maximum of $25,000) and the bonus depreciation (the Section 179 deduction must be applied first and then the bonus depreciation) to produce a sizable first-year tax deduction. However, the vehicle cannot exceed a gross unloaded vehicle weight of 14,000 pounds. Caution: Business autos are 5-year class life property. If the taxpayer subsequently disposes of the vehicle early, before the end of the 5-year period, as many do, a portion of the Section 179 expense deduction will be recaptured and must be added back to income (SE income for self-employed individuals). The future ramifications of deducting all or a significant portion of the vehicle’s cost using Section 179 should be considered.

If you have questions related to the best methods of deducting the business use of your vehicle or the documentation required, please give this office a call.

The LLC or S Corporation Choice


With some frequency a potential buyer will ask if he should form a legal entity with which to operate the business once the purchase is finalized. The answer is generally yes when issues of liability and tax are considered.  As liability is a question of law I will always suggest that an individual who wants to explore that subject  confer with their attorney .  However,  I am always happy to talk to issues of tax.There are positive and negative factors to operating in each form of business,   but a few things in my mind are critical:

An LLC is essentially a partnership and a “flow through entity” . The earnings of the entity are going to pass through to the members and be subject to both income tax and ( generally)  self – employment tax . The self-employment  tax is 15.3% , which represents  both sides of the  SSA and Medicare tax paid on wages in a salary man situation.

But wait there is more ( love those ads ):

For all California source income the LLC will be charged a fee based upon income ( Sales) which ranges from a low of $900 to a high of $11,790 depending  on  the revenues  of the business.  

If you are planning to purchase real estate , have non resident aliens as investors,  or plan uneven distribution of profits a case can be made for the LLC .  Also professional service providers will often establish themselves in the LLC structure for reasons that need not be explored here.

The S corporation ( also a Flow Through Entity)  is more formal in it’s structure  and can have up to 100 shareholders , all of whom have to be  US citizens or residents.  Estates and certain trusts can be shareholders.  It is critical that all distributions ( but not wages)  reflect the pro rata shareholder interests in the corporation.

However ,  if the shareholder operating the business is paid a “reasonable salary” the remainder of the profits  are not subject to the self employment  tax and a substantial tax saving can be achieved. The tax code does not define “ reasonable salary” and the argument  with IRS is always challenging . There are no additional fees paid to California in this type of entity, although they do assess a tax of 1.5% of net taxable income .

 Do not put real estate into an S corporation .

The above is a simple analysis of the issues and should not be considered either exhaustive or formal. It is possible for an LLC to file income taxes as an S corporation but there are complex rules to this strategy.

The tax code is complicated and each individuals situation different . This requires that you consult with your own legal and tax advisors.

 Glad to talk this over with anybody  seeking  further information.

Sacramento Tax Preparer On: Tax Extensions, Demystified

Sacramento Tax Preparer On: Tax Extensions, Demystified

It’s the final full week of tax season, and our Sacramento tax preparation office is hopping!

I’m still taking the time to step away for a moment and write to you, my friend (if you have all your papers in, and are waiting for our completion — fear not! My team is hard at work, as I type …).

This is often our busiest week of the year for Team David MacMillan (so please be understanding), but it’s also the week when we receive, with clockwork regularity, many questions about extensions.

But before I get there, a couple quick reminders about what ELSE the 15th means…
1) Tuesday, April 15 is the deadline to contribute to IRA’s, etc. in order to have them count on this year’s (2013) taxes.

2) It is also the deadline to claim the almost $800 million in unclaimed refunds for returns dating back to 2010. If you, for some reason, didn’t file for that year, you could be missing out. Call us for this special circumstance: (916) 438-6964
(Or for any other question — but again, bear with us, as we are extremely busy!)

And one last thingif you have filed your taxes with us already, and you had a good experience, would you…

A) Email me about it?

B) Share us on your Facebook wall…?
 Join us on Facebook: https://www.facebook.com/pages/Quasar-3-Accounting-and-Tax/576626522426035

Here’s something you can say:

I had my taxes prepared by David MacMillan’s team, and had a great experience. They also just told me that they are willing to help procrastinators! So, if that’s you, give them a call at: (916) 438-6964 and let them know I told you to call. Or you could do it tomorrow, of course 🙂

Or some such… thanks again!

Sacramento Tax Preparer On: Tax Extensions, Demystified
“Only undertake what you can do in an excellent fashion. There are no prizes for average performance.” – Brian Tracy

There is a lot of confusion in the Sacramento tax preparation orbit, every year, about extensions — so here’s what they’re REALLY about…

As you know, Tuesday, April 15th is the filing deadline for a federal tax return. If you need more time to get your paperwork complete, you need to file (or have us file on your behalf) Form 4868 (Automatic Extension of Time to File — http://www.irs.gov/pub/irs-pdf/f4868.pdf ) with the IRS by the end of the day on the 15th. This gives you an automatic six-month (until October 15, 2014) extension of time to file.

Here’s the deal: An “Extension of Time to File” is not an “Extension of Time to Pay”, unfortunately — except for certain cases (more on these in a moment). In normal circumstances, the Extension simply gives you an automatic six months of additional time to get your paperwork together and file that return. But, if you owe more than what you paid with your estimate, you’ll be accumulating penalties and interest on the difference–so PLEASE don’t take the entire six months to do this!

The exception to this rule is for:
1) Those affected by the Washington state flooding
2) Wage earners who have been unemployed at least thirty consecutive days during 2013 or in 2014 up to this year’s April 15 tax deadline; or
3) Self-employed individuals who experienced a 25 percent or greater reduction in business income in 2013 due to the economy.

So, if that’s you — let us know! We’ll get you payment relief.

For the rest of you, when filing your “Extension of Time to File”, you’ll need to estimate what you think you owe to the IRS. This should not be pulling numbers out of thin air (or various body parts)! You’ll still need to go through your receipts and tax documents and get them “somewhat” organized.

From here, you can estimate both your income and your expenses, and then approximate what you owe Uncle Sam. Keep in mind that this is an ESTIMATE. And, you’ll have to pay what you estimate you owe at the time we file for the extension.

You can do this all electronically through our office, you can mail in the form WITH estimated payment (must be postmarked by the 15th), or you can call a specialized provider and pay by credit card. We can provide you with the appropriate number to call.

And it’s NOT TOO LATE!


David MacMillan
(800) 392-0695


Your Friendly Sacramento Tax Preparation Expert on Doing Real Work Through Procrastination

Your Friendly Sacramento Tax Preparation Expert on Doing Real Work Through Procrastination

This is not an April Fool’s joke.

I teased around the idea of playing some kind of prank on my readers, something about the tax code being abolished in favor of one short form of four pages … but I thought that would be cruel and unkind.

Not that any of us here in Sacramento would fall for it. Nobody would ever believe THAT. (http://taxfoundation.org/blog/americas-first-income-tax-form)

I’m quite serious today though, because I want to speak to a serious problem: procrastination. I have some thoughts for you on that, but before I get there, some important notes…

Firstly, even at this late hour, we will gladly receive friends of our existing clients — we make a special point to accommodate clients’ friends, because we’ve found that our great clients have very good taste in friends.

So, share this article with your friends right now and make sure they let us know you sent them. They can also call: (916) 438-6964 and we’ll be their last-minute lifeline!

Secondly …

Obamacare Deadline Extended: If you haven’t signed up for insurance, and you can comfortably assert that you “started” before Monday, March 31 … well, you have more time. Not sure yet how much, but … you have more time. Procrastinate away!

Do you have any Bitcoin? We probably need to talk then — the IRS just decided to classify it as “property”, so capital gains taxes now apply (effective immediately). We can help you with it, as it’s important to be smart about your transactions there. Tax software is NOT equipped for this.

Are you carrying student loans? Beware new “forgiveness” schemes. There could be a big ol’ tax bill in your future. Again, software is part of the problem here. I may have more to say on this in the future.

Now, lest we procrastinate further, on to the meat.

Your Friendly Sacramento Tax Preparation Expert on Doing Real Work Through Procrastination
“You can use the fanciest computers to gather the numbers, but in the end you have to set a timetable and act.” – Lee Iacocca

Right now, there are an infinite number of things you could be doing. No matter what you work on, you’re not working on everything else. So the question is not how to avoid procrastination, but how to procrastinate well.

In my view, there are three kinds of procrastination. Depending on what you do instead of working on something, you could work on:
(a) nothing,
(b) something less important, or
(c) something more important.

That last type, I’d say, is good procrastination.

This is the “absent-minded professor” who forgets to shave, or eat, or even perhaps look where he’s going while he’s thinking about some interesting question. His mind is absent from the everyday world because it’s hard at work in another.

That’s the sense in which the most impressive people I know are all procrastinators. They’re type-C procrastinators: they put off working on small stuff to work on big stuff.

What’s “small stuff?” Roughly, work that has zero chance of being mentioned in your obituary. It’s hard to say at the time what will turn out to be your best work (will it be your thesis for your PhD, or that detective thriller you worked on at night?), but there’s a whole class of tasks you can safely rule out: shaving, doing your laundry, cleaning the house, writing thank-you notes–anything that might be called an errand.

Good procrastination is avoiding errands to do real work.

Good in a sense, at least. The people who want you to do the errands won’t think it’s good. But you probably have to annoy them if you want to get any real work done. The mildest-seeming people, if they want to do real work, all have a certain degree of ruthlessness when it comes to avoiding errands.

Some errands, like replying to emails, go away if you ignore them (perhaps taking friends with them). Others, like mowing the lawn, or filing your tax returns, only get worse if you put them off. In principle, it shouldn’t work to put off the second kind of errand. You’re going to have to do whatever it is eventually. Why not (as past-due notices are always saying) do it now?

The reason it pays to put off even those errands is that real work needs two things errands don’t: big chunks of time, and the right mood. If you get inspired by some project, it can be a net win to blow off everything you were supposed to do for the next few days to work on it. Yes, those errands may cost you more time when you finally get around to them. But if you get a lot done during those few days, you will be net more productive.

So here’s where we come in.

Consider us “The Ultimate Procrastination Solution”.

Allow us to take the pain away from these second-level tasks (like getting your return filed) — and you go back to writing that killer novel.


David MacMillan
(916) 438-6964

David MacMillan On Rethinking Retirement With Values

David MacMillan On Rethinking Retirement With Values

Well, before the weekend was over from our vantage point here in Sacramento, Buffett’s billions were safe from any perfect brackets, and the field of 64 college basketball teams was narrowed down to 16 which nobody actually predicted — not even this humble Sacramento tax preparer.

Which, of course, is exactly how it always goes.

We make plans, but life comes hurtling at us at speeds we never anticipate. Plans are made to be scrapped … but it’s the living AFTER those plans become irrelevant that really matters.

Before I get into the meat of my note for our Sacramento tax preparation clients this week, a few vegetables:

The IRS is warning of “the largest scam of its kind we have ever seen.”(http://www.washingtonpost.com/blogs/federal-eye/wp/2014/03/20/irs-watchdog-warns-of-largest-scam-of-its-kind/ — be on guard, people.)

There is still $760+ million in unclaimed tax refunds from 2010 waiting for its home. Make sure that your 2010 return was done PROPERLY (especially if prepared by another Sacramento – area tax office), and have David MacMillan and the team review it for you by April 15th!

Now, last week, I gave you a framework for how you should be considering retirement. I have more to say this week, but it’s more along the lines of a bigger picture approach to the whole question. My hope is that it will give YOU hope … for whatever stage you happen to find yourself in the retirement progression.

We’re working like busy bees here in the Sacramento tax offices on client tax returns these next few weeks before April 15th, and I would also like to say: if you have not yet done so, we need to get your information to complete your return as soon as possible. This has been a very busy season … so as much as you can enable us to do our work on your behalf, the better.

Give us a call: (916) 438-6964 or shoot me an email to let us know your plans.

David MacMillan On Rethinking Retirement With Values
“When planning for a year, plant corn. When planning for a decade, plant trees. When planning for life, train and educate people.” – Chinese Proverb

Retirement used to mean not only a complete withdrawal from the workforce but often a retreat from life. Even the word “retire” has the connotations of shuffling quietly off to bed.

We call that traditional concept a “cliff retirement” here in our Sacramento tax preparation offices because it is so abrupt. One day you are working full-time, and the next you are playing full-time (or slumped in your chair watching TV feeling unwanted and over the hill).

We all need meaning and significance in our lives. And close social relations are an intrinsic part of our humanness. For many people, work provides meaning, significance and social relationships.

Try this retirement planning exercise. Draw a large circle and write the names of 10 people inside the circle to whom you are genuinely close. Don’t include any relatives. To a certain extent, they have to love us, and although our connections with our families can be very nurturing, it is often friends who really help to validate us and widen our horizons.

Now cross out any of the 10 names you know through your work, which might eliminate half or more of the people you listed. Thus a cliff retirement can devastate not only your meaning and purpose but your social network as well. Retirees who no longer work at all say their close friends dwindle to an average of about nine people.

As a result of their isolation, people who opt for a cliff retirement often deteriorate quickly and die relatively young. Financial planning is easy when you die young, but we don’t recommend it.

Here are some suggestions to consider as you approach what is traditionally considered retirement age.

Consider postponing retirement. Delaying retirement until age 70 increases your Social Security benefits and also shortens the time you will be withdrawing from your portfolio. It gives you additional years to save and your portfolio more time to grow. By delaying retirement from age 65 to 70, you may have more than a 50% higher standard of living when you do stop working.

Or instead of taking a cliff retirement, think about retiring gradually. Move from full-time to 30 hours a week, and then to half-time. With this less hasty transition you can maintain contact with the people and purposes that give your life meaning and also have the time to develop goals and a network of relationships for your later years.

Envision your final years not as retirement but as financial independence. Now that you don’t need to work exclusively for money, make a list of activities where you would like to focus your energies and use your skills and experience.

Consider developing a health and fitness routine. If work kept your mind and body engaged, you will need to replace that activity with other pursuits. Again, going part-time allows you the luxury of processing the transition and adjusting to a new lifestyle.

Challenge and reexamine those stereotyped and overly rigid assumptions about retirement. Two books that may help you tailor your retirement to be a productive and satisfying time of your life are Encore: Finding Work That Matters in the Second Half of Life by Marc Freedman, and The New Retirementality: Planning Your Life and Living Your Dreams at Any Age You Want by Mitch Anthony.

Of course crunching the financial numbers is critical as you begin to contemplate retirement, or any kind of financial or tax planning. But your personal calling, support network, and health and well-being are just as important. In the end, a holistic approach to your life is always the best starting place.

I hope this all helps! To your family’s LONG-TERM well-being …

And don’t forget to send your friends our way! We’re quite busy, of course, but always make room for referrals from trusted sources…


David MacMillan
(916) 438-6964

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