Will I get into trouble with the IRS with the following situation?

Question

I know that the IRS prohibits using the ACTUAL EXPENSES METHOD during the first year of vehicle usage (i.e. 2005) and then using the STANDARD MILEAGE deduction for the succeeding years (2006)...But I tried to circumvent this rule by the ff:

I want to shift to the STANDARD MILEAGE method this year and subsequent years. Therefore, I filed an amended tax return (1040x) for 2005 and changed my vehicle deduction from Actual to Standard Mileage. Then I included a payment with the return to make up for the resulting tax deficiency.

I then filed my current return for 2006 using the Standard Mileage method which is easier and allows me a larger deductible this year. Is this allowed?

Answer 1

Yep, that will work!

However, the bar on switching from actual expense to standard mileage only applies if you took depreciation using any method OTHER THAN straight line. If you used the straight line method of depreciation there would have been no need to amend the 2005 return. If you used any form of accelerated depreciation then you did it correctly.

Answer 2

Sounds like you're OK. Your amended 2005 return would be the one in effect for that year, not the original.

Answer 3

You are more brave than I. I feel thats asking for an audit. I prefer to fly below radar, but it depends on the amount of money were talking about also.

But, you already did it, so too late for anyone to change your mind.

Good Luck