May 2020 Question and Answer

Question

My company is facing a retirement plan audit. How do I best prepare?

Answer

First, understand that besides talking to your tax professional, there are few similarities between an overall company audit (see accompanying article) and a retirement plan audit. You may want to consult a plan consultant to gather necessary documents and begin a series of tests. This includes doing compliance testing to ensure your highly compensated employees don’t contribute more than allowed to your company plan. You’ll also want to check that all eligible employees know they can contribute, you follow IRS and other government rules when offering automatic plan tools, and the plan is fulfilling other fiduciary responsibilities.

Question

I’m a self-employed delivery driver who volunteers to deliver meals to seniors and the disadvantaged. Can I deduct the cost of my time?

Answer

No, you can’t deduct your time, but you can deduct your mileage. In 2020, the IRS allows taxpayers to deduct the standard mileage rate of 14 cents per each mile their vehicles were used for eligible charitable work. Incidentally, the business standard mileage rate is 57.5 cents and the mileage rate for driving to and from medical care is 17 cents in 2020. Talk to your tax professional for more information, including whether you’ll need to itemize on your return to get these tax breaks.