Part IV – Information on Your Vehicle on the Schedule C tells the IRS about the Vehicle used in your Business whose income and expenses are reported on this Schedule C.
You only have to fill out this Part IV if you listed Car and Truck expenses on Line 9 of the Part II – Expenses – and you are not depreciating the Vehicle, which would be reported on form 4562 – Depreciation and line 13 in the Part II – Expenses.
You depreciate the cost of the Vehicle when you own the vehicle and you are using actual vehicle expenses as compared to the Standard Mileage Rate.
You also must use this Part IV – Information on Your Vehicle when you use the Standard Mileage Rate and/or you are Leasing the vehicle.
You also must use this Part IV, when you use the actual vehicle expenses method, but you lease the car, instead of owning the car. This is because a Leased car is never depreciated.
See the Part IV image below:
line 43: lists the exact month, day and year you placed this Vehicle in service as used in your Business.
line 44: list the Business, Commuting, and Other miles this Vehicle was driven during the tax year. It is recommended you keep a log book in your Vehicle to record each Business use trip you drove the Vehicle for during the tax year. List the date, the purpose of the trip, what location you visited, the person you visited, and the mileage. You can also keep track of expenses in the log book, if you use the actual vehicle expenses method.
line 45: tells the IRS if this Vehicle used for your Business was also available for your personal use, after business hours. This would indicate to the IRS how the mileage use is segregated during the year.
line 46: tells the IRS if this is the only Vehicle you own, or if you have other vehicles available for your personal, non-business use.
line 47a: tells the IRS if you indeed kept a log book, which would provide evidence to support your Vehicle deductions.
line 47b: tells the IRS if you have written evidence to support the Vehicle deductions listed on the Schedule C. Keep a log book to prove expenses.
See Publication 463-Travel, Entertainment, Gift, and Car Expenses for explanations of expenses related to your Vehicle used in the Business.
The line 13 Depreciation was explained in a previous blog post. Please review at The 1040: The Schedule C: Part II – Expenses and scroll down the blog page to the line 13 explanation. See also form 4562-Depreciation and Amortization. and form 4562-Depreciation and Amortization-Instructions.
If you own your Vehicle, you can depreciate the cost of the vehicle over a five-year period to create a yearly deduction. There are many specific rules to follow when you depreciate a vehicle used in your Business. That explanation is beyond the scope of this Blog. Just post a comment on this blog post, or send me an email with your vehicle depreciation questions.
Click the hyperlink below for the post that explains the Self-Employment Taxes and the (3) Adjustments on page 1 of the form 1040 related to Self-Employment issues.
Feel free to comment on these blog posts, or send me an email at Mike@TaxesAreEasy.com
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