Warning: Illegal string offset 'src' in /home/shenklaw/public_html/laweasy.com/wp-content/themes/laweasy/single-tips.php on line 45
< Back to

How RV’ers can Be Tax Prepared

How RV’ers can Be Tax Prepared

By: Martin M. Shenkman, CPA, MBA, JD

 

   

Most folks view the IRS as a cross between Darth Vader and a Vampire. The reality is that most IRS agents are regular people trying to do their job (sure, there are some exceptions, but haven’t you ever had a waitress bite your head off ‘cause you wanted your coffee warmed up one more time!). Still, most taxpayers are far too lax in how they prepare for a possible future audit. And far too many employees and business owners are far too lax in how they prepare for payroll tax audits. So, how does RVing provide good lessons in preparedness for tax issues? Read on.

 

 

 

Some people have checklists for their checklists, just to keep track of their checklists before an RV trip. Yeah, I’ve prepared some checklists for my first trip, but I’ve also seen checklists that had more columns and details that even I, as an obsessive compulsive accountant, could imagine! I had seen so many checklists for my first RV trip, I finally created the checklist attached below.  But is that degree of precision the best way to prepare to address tax issues? I suspect not.

 

 

 

Some RVers map out their day and plan what town (and sometimes even what station) they will stop in to get gas. We don't make those plans. Instead, when our gas gauge shows about half full, we just stop and fill it. This way, there's no need to worry if that particular station is open, or if it is further than our calculations, or whatever else could go wrong.  Can you imagine traveling with someone that has to plan to the intricacies of gas stops? That Felix Unger does RV’ing!

 

 

 

Now, how many people do you know that use a checklist to prepare their tax records during the course of the year? Most CPAs will send you a checklist to prepare the information they need to do your tax return. They’re usually really long and equally un-exciting documents, on which you are to fill in all the income and expense data, and answer more questions than are required for a life insurance application. For the record, which my accountant can confirm, I carefully file the organizer I get in the mail in the circular file. Am I imprudent? No, but I’ve used the same approach to prepare for tax filing and the seemingly inevitable tax audit, that long time RV’ers use with their checklists.

 

 

 

 

 

Being prepared is not just for Boy Scouts. Being responsible is at the heart of safe and fun RV’ing. Many RV’ers don't focus a lot on preparing, because they live prepared. Case in point, you may not have checklists of what to put in the RV before you leave. Instead, you may just keep your RV stocked with clothing, kitchen and bath things, non-perishable foods, some jugs of water, tools, pet supplies, office stuff, fishing equipment, etc. When it isn't freezing out, you may keep the fresh water tank full of water. When you decide you are going to take the trailer somewhere, you just grab your laptop, dog, and hit the road. This is the recipe for minimizing or even avoiding taxes, tax audits, and many other issues. You don’t need to conduct or plan your life to the point of it being painful (like the checklists of gas stops would be for everyone other than Felix Unger), but you should live tax prepared. Here are some simple examples:

 

 

   
  • Keep your checkbook on Quicken or another financial/checkbook program. If you enter checks as you pay them (and, if you’re on the road, banking online is liberating) you’ve eliminated most of the preparation for preparing your tax return, or handling a future audit.
 
  • If you’ve lived prepared, when tax return time comes (Yippee!) you can print schedules right off your Quicken, or other program, to give to your tax preparer, or you can load TurboTax (or comparable program) that can prepare the return by importing most of your data. A few extra minutes a week to code each transaction will make tax preparation cheaper, quicker and easier. You live prepared.
 
  • What about the audit? If you have all your transactions on Quicken (by the way, no royalty, it’s just the program I’ve used for … since before I can remember), you can print schedules to check the audit notices. Common notices from the IRS or state tax authorities pertain to payments you claim you have made that their systems don’t reflect. If you have all your state tax payments in a category and your IRS payments in another, a few quick key strokes will give you the listing you need.
 
  • Save key bills that support tax deductions. We just bought a cheap scanner and are starting to scan these to make it even easier to have what we need and eliminate the mounds of paper. If you’re full-timing, scanning tax stuff is the only way to avoid having to store documents in a warehouse for friends basement (and Murphy’s Law will assure that you are a thousand miles away from that location when you get a tax audit notice!).
 
  • Use a separate account or quicken file for your business. Never commingle business and personal funds until you make a distribution out of the business. That’s living prepared.
 
  • Use separate credit cards for personal and for business.
 
  • Keeping financial matters separate can support the position that the entity owning your business, for example, should be respected if you’re ever sued. Keeping separate records will avoid the need to painstakingly go through all your transactions and separate them out for tax returns, audits or other issues.
 
  • Keeping your RV stocked with non-consumables, like clothes, tools, etc. is common. That way you don’t have to sweat the packing stuff before you hit the road. This is similar to how you can protect your business entity from lawsuits and other problems. Prepare annual minutes. Be sure to have a governing legal document (e.g. shareholders agreement or operating agreement for a corporation and LLC, respectively). That’s living legally prepared. You really cannot and should not rely on reconstructing these documents after a problem strikes (and you never ever backdate anything).
 
  • Keep a calendar of what you do and where you are. Example: If you use Microsoft Outlook for your business, note each day's appointments, which state you were in, etc. This can make it really easy to search for information you may need later. This could be as simple as putting the state abbreviation followed by a colon in front of appointments or business activities on your calendar (e.g., “NV:” for Nevada. So if you sold goods at a fair in Las Vegas your calendar could list “NV: Antique Fair.” That makes it really easy to search by state to create a list of which state you were in for business if you receive a letter from a state tax authority. Reconstructing this information later is not only impossible, but it looks self-serving and is less likely to be believed. If you keep the records as you go along as a rule, the information will be more accurate and credible. It will also make it incredibly quick and easy to deal with some of the common audit issues. It really doesn’t take more than focus on tax issues along the way to save much grief later.
 

 

 

You’ve heard the ads for Hair Club for Men. Almost as much a piece of Americana is an Airstream Trailer! Sy Sperling says: "I'm not just the president, I'm also a client®". Well, me too (tax issues, not hair loss). I seem to get audited by some tax authority pretty much every year (they like me, I guess!). So, the steps above: Outlook calendar with business appointment details, specifics of each transaction in Quicken (I use QuickBooks for the business – it does more and keeps the business and personal stuff separate) and other tips we’ll address in future articles, all help minimize the burden of responding, and greatly increase the success in dealing with audits. I’m not just the author, I’m the guy getting nailed with the audits too!

Our Consumer Webcasts and Blogs

Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.

Ad Space