Standard mileage deduction and gig economy workers

[haapai]

I was talking to a Shopper (i.e. a self-employed person who fulfills grocery orders) the other day and being able to use deduct mileage at 54.5 cents a mile appeared to be a huge part of her gig. 

It doesn't take a rocket scientist to determine that her actual costs per mile driven are almost certainly much lower than that and that using the standard mileage deduction allows her to shield a lot of 1099 income from taxation. 

Let's assume that she keeps scrupulous and accurate records of the miles incurred on the job.  This is not a question about claiming mileage that wasn't driven. 

If the actual costs of operating the vehicle on a per mile basis are low enough, say 20 cents per mile, is there anything stopping her from returning to her home between orders instead of hanging out in the parking lot waiting for the next order?  Doing so would result in her driving an additional 10 miles if she gets another order, generating an actual cost of $2 but allowing her to deduct $5.45.  That difference of $3.45 is worth at least a buck to someone who is paying self-employment on top of state and federal taxes. 

During slow periods, taking that trip home and back is unlikely to affect the number of orders that she will catch and be able to fulfill during her shift.  (I've worked piecework in a distribution center and when it gets slow enough, there is no incentive to be positioned to get the order fulfilled as soon as possible.) 

Is there any nitty-gritty in the tax law that makes the extra mileage non-deductible?  I've tried finding the answer in Publication 463 but quickly went into just scanning mode.  I don't think that the answer is there. 

Does anyone here have any first-hand knowledge of the IRS regs regarding this or suggestions as to other Pubs to pore over? 

[rangerj]

In simple language, not taxeeze, going from home to the job site is personal  mileage, getting ready for work, and not deductible. The same is true for mileage from the last job site to home. In your example the driver leaves the job site and goes home. That mileage is personal and not deductible as is the trip back to the work site. As for the standard mileage rate it is way below the actual costs to own and operate a vehicle as proven by the costs incurred and documented by rental car companies such as Hurts, Enterprise, and Avis. The standard mileage rate is an alternative to keeping track of all your mileage and determining what percentage of all of your cost of operating the vehicle are business and what percentage is personal. The business portion would be the deduction. This requires detailed record keeping. See Internal Revenue Code section 162 regarding "ordinary and necessary" business expense deduction and section 274 regarding travel expenses. The regulation sections are 1.162 and 1.274 of the U.S. Treasury Regulations. Note the Internal Revenue Code is Title 26 of the U.S. Code. Also note that there are other complexities if one is operating multiple vehicles, commercial vehicles, and a few other situations beyond the scope of this discussion. There is an "APP" that is very useful in keeping track of mileage. 

[haapai]

When I asked one of the shoppers which app she was using, she told me that she had given up on the ones that she had tried.  Apparently, separating out the personal mileage was such a PITA that she had reverted to just writing things down. 

Ouch!  I think that she should be using an app.  That mileage deduction is worth way too much to ever ask the IRS to just trust you.  Get some third-party documentation, girl! 

I stand by my argument that the costs of driving their vehicles an extra mile are less than the standard mileage rate.  The shoppers tend to be college students or recent grads driving cheap gas-sippers.  Gas costs them very little, there are no additional insurance costs for driving the extra miles, and the depreciation and maintenance costs, while real, and likely more than the cost of gasoline, still don't put the total over 54.5 cents a mile.   The key here is to treat insurance as a sunk cost and to be driving a car that doesn't depreciate much. 

OTOH, I'll definitely accept your argument that the IRS sees the big box grocery store as the worksite and is quite adept at shooting down arguments that this is a work from home gig and that the shopper's kitchen table should be considered the worksite.  

[chapeau]

Apr 11, 2018 14:21:43 GMT -5 haapai said:

When I asked one of the shoppers which app she was using, she told me that she had given up on the ones that she had tried.  Apparently, separating out the personal mileage was such a PITA that she had reverted to just writing things down. 

Ouch!  I think that she should be using an app.  That mileage deduction is worth way too much to ever ask the IRS to just trust you.  Get some third-party documentation, girl! 

I stand by my argument that the costs of driving their vehicles an extra mile are less than the standard mileage rate.  The shoppers tend to be college students or recent grads driving cheap gas-sippers.  Gas costs them very little, there are no additional insurance costs for driving the extra miles, and the depreciation and maintenance costs, while real, and likely more than the cost of gasoline, still don't put the total over 54.5 cents a mile.   The key here is to treat insurance as a sunk cost and to be driving a car that doesn't depreciate much. 

OTOH, I'll definitely accept your argument that the IRS sees the big box grocery store as the worksite and is quite adept at shooting down arguments that this is a work from home gig and that the shopper's kitchen table should be considered the worksite.  

Pretty sure my CPA told me many years ago that even though I worked from home, if I was regularly driving to X place to work, that was a commute, not deductible mileage. I could charge a client for it, but it wasn’t deductible. That was 15+ years ago, so things might have changed or I might me remembering wrong.

[TheOtherMe]

The kitchen table is not an office in the home.  To have business mileage, you need to have an office in the home to have established that it is a business.

Going from job #1 to #2 is deductible even for employees--this year.