Safe Harbor Method for Determining a Wagering Gain or Loss from Slot Machine Play Notice 2015-21

Section 61.– Gross Income Defined 26 CFR 1.61-1: Gross Income. (Also § 165; 1.165-10) Safe Harbor Method for Determining a Wagering Gain or Loss from Slot Machine Play Notice 2015-21

This notice provides a proposed revenue procedure that, if finalized, will provide an optional safe harbor method for individual taxpayers to determine a wagering gain or loss from certain slot machine play. Section 61 of the Internal Revenue Code provides that gross income means all income from whatever source derived. See also § 1.61-1 of the Income Tax Regulations. Gains from wagering transactions are included in gross income. See Rev. Rul. 54-339, 1954-2 C.B. 89. Neither the statute nor the regulations define the term “transactions.” Gross income from a slot machine wagering transaction is determined on a session basis. See Shollenberger v. Commissioner, T.C. Memo. 2009-306 (2009); LaPlante v. Commissioner, T.C. Memo. 2009-226 (2009). Section 165(d) provides that losses from wagering transactions are allowed only to the extent of the gains from such transactions. See also § 1.165-10 of the Income Tax Regulations. But see § 873(a) (for a nonresident alien individual, deductions are allowed only to the extent that they are connected with income that is effectively connected with the conduct of a trade or business within the United States). The Internal Revenue Service (Service) and the Treasury Department are aware that determining the amount of a wagering gain or loss 2 from slot machine play is burdensome for taxpayers and sometimes creates controversy between taxpayers and the Service. See, e.g., Shollenberger, supra; LaPlante, supra; Kochevar v. Commissioner, T.C. Memo. 1995-607 (1995). This controversy is complicated by changes in gambling technology. The increased use of electronic gambling, with the development of player’s cards and tickets, has curtailed the redemption of tokens by slot machine players. To reduce the burden on taxpayers, this proposed revenue procedure, if finalized, will provide an optional safe harbor method for determining what constitutes a session of play for purposes of calculating wagering gains or losses from electronically tracked slot machine play under § 61. The proposed revenue procedure describes the circumstances in which the safe harbor method can be used and provides examples of its application. Use of the safe harbor method will not relieve taxpayers of the requirement to maintain records that substantiate any items reported on their income tax returns. See § 6001; Rev. Proc. 77-29, 1977-2 C.B. 538. This proposed revenue procedure does not address how the separate transactions determined under the safe harbor are taken into account in determining total gain or loss for a taxable year. See Shollenberger, supra (gambling losses are allowable, if at all, as itemized deductions in calculating taxable income). In particular, this revenue procedure does not permit gains or losses from separate sessions to be netted against each other to determine gain or loss for a taxable year. In addition, this safe harbor method applies only to wagering gains and losses; it does not apply to nonwagering expenses related to gambling. See Mayo v. Commissioner, 136 T.C. 81 (2011), acq., 2012-3 I.R.B. 285, action on dec., 2011-06 (Dec. 21, 2011) (section 165(d) 3 does not limit deductions for expenses incurred to engage in the trade or business of gambling). The Service and the Treasury Department request comments from the public regarding the optional safe harbor method under this proposed revenue procedure. In particular, we request comments regarding: (1) alternative definitions for the term “slot machine;” (2) whether an interruption in play, such as leaving the gaming area for over 15 minutes, should affect the determination of what constitutes a single session of play; (3) whether a session of play should be based on a period other than a calendar day (making adjustments when necessary to accommodate the end of a taxpayer’s year on December 31st); (4) whether the definition of a single session of play should be determined by other factors, such as the duration of a trip or by each slot machine played (comments should include an explanation of the benefits and drawbacks of the proposed method); (5) whether the safe harbor should include payouts in the form of merchandise and bonus rewards; (6) whether the topic is appropriate for the Industry Issue Resolution (IIR) program described in Rev. Proc. 2003-36, 2003-1 C.B. 859; (7) whether a safe harbor method to determine a wagering gain or loss should be developed for other forms of gambling, including, but not limited to, keno, table games, and pari-mutuel wagers (comments should include the form of gambling, a description of the proposed safe harbor method, and an explanation of the benefits and drawbacks of the proposed method); and (8) whether any aspects of the optional safe harbor pose problems of administrability for stakeholders (including whether the issues and possible modifications on which comments are requested would pose problems for sound tax administration).4 Comments must be submitted by June 1st, 2015. Comments, identified by Notice 2015-21, may be sent by one of the following methods: • By Mail: Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2015-21) Room 5203 P.O. Box 7602 Ben Franklin Station Washington, D.C. 20044 • By Hand or Courier Delivery: Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to: Courier’s Desk Internal Revenue Service Attn: CC:PA:LPD:PR (Notice 2015-21) 1111 Constitution Avenue, N.W. Washington, D.C. 20224 • Electronic: Alternatively, persons may submit comments electronically to Please include “Notice 2015-21” in the subject line of any electronic communications. All submissions will be available for public inspection and copying in Room 1621, 1111 Constitution Avenue, N.W., Washington, D.C., from 9 a.m. to 4 p.m.


This revenue procedure provides an optional safe harbor method for taxpayers to determine a wagering gain or loss from certain slot machine play.

5 .01 Section 61 of the Internal Revenue Code provides that gross income means all income from whatever source derived. See also § 1.61-1 of the Income Tax Regulations. Wagering gains are included in gross income. See Rev. Rul. 54-339, 1954-2 C.B. 89. .02 Section 165(a) allows a deduction for any loss sustained during the taxable year and not compensated for by insurance or otherwise. .03 Section 165(d) provides that losses from wagering transactions are allowed only to the extent of the gains from such transactions. .04 Section 1.165-10 of the Income Tax Regulations provides that losses sustained during the taxable year on wagering transactions are allowed as a deduction but only to the extent of the gains during the taxable year from the transactions. .05 Gross income from a wagering transaction is calculated by subtracting wagers placed to produce the payouts from the payouts as a preliminary step in determining gross income. See Rev. Rul. 83-130, 1983-2 C.B. 148. .06 Gross income from a slot machine wagering transaction is determined on a session basis. See Shollenberger v. Commissioner, T.C. Memo 2009-306 (2009); LaPlante v. Commissioner, T.C. Memo. 2009-226 (2009). Determining whether a series of wagers is a “session” requires analyzing the relevant facts and circumstances and can present practical difficulties. Shollenberger, supra.

The following definitions apply solely for purposes of this proposed revenue procedure. .01 Slot Machine. “Slot machine” means a device that, by application of the element of chance, may deliver, or entitle the person playing or operating the device to receive 6 cash, premiums, merchandise, or tokens whether or not the device is operated by insertion of a coin, token, or similar object. .02 Payout. “Payout” means the amount, if any, payable to the taxpayer as a result of a wager placed by the taxpayer. .03 Electronically Tracked Slot Machine Play. The term “electronically tracked slot machine play” means slot machine play using an electronic player system that is controlled by the gaming establishment (such as through the use of a player’s card or similar system) and that records the amount a specific individual won and wagered on slot machine play. .04 Session of Play. A session of play begins when a patron places the first wager on a particular type of game and ends when the same patron completes his or her last wager on the same type of game before the end of the same calendar day. For purposes of this section, the time is determined by the time zone of the location where the patron places the wager. A session of play is always determined with reference to a calendar day (24-hour period from 12:00 a.m. through 11:59 p.m.) and ends no later than the end of that calendar day.

This revenue procedure applies to individual taxpayers who engage in electronically tracked slot machine play.

The Service will not challenge a taxpayer’s use of the definition of a session of play set forth in section 3.04 of this revenue procedure in calculating a wagering gain or wagering loss from electronically tracked slot machine play provided that the taxpayer 7 complies with the provisions of section 6.01 through section 6.04 of this revenue procedure.

.01 A taxpayer determines a wagering gain or loss from electronically tracked slot machine play at the end of a single session of play (as defined in section 3.04) as follows: (1) A taxpayer recognizes a wagering gain if, at the end of a single session of play, the total dollar amount of payouts from electronically tracked slot machine play during that session exceeds the total dollar amount of wagers placed by the taxpayer on electronically tracked slot machine play during that session; (2) A taxpayer recognizes a wagering loss if, at the end of a single session of play, the total dollar amount of wagers placed by the taxpayer on electronically tracked slot machine play exceeds the total dollar amount of payouts from electronically tracked slot machine play during that session. .02 A taxpayer must use the same session of play if the taxpayer stops and then resumes electronically tracked slot machine play within a single gaming establishment during the same calendar day. .03 If a taxpayer uses the definition of a session of play set forth in section 3.04 for any day in a calendar year at a particular gaming establishment, the taxpayer must use that definition for all electronically tracked slot machine play during the taxable year at that same gaming establishment. .04 If, after engaging in slot machine play at one gaming establishment, a taxpayer leaves that establishment and begins electronically tracked slot machine play at another 8 gaming establishment, a separate session of play begins at the second establishment, even if played within the same calendar day as the first. .05 Examples. In each example below, the taxpayer uses the safe harbor method provided by this revenue procedure for all electronically tracked slot machine play for the calendar year and can properly substantiate all wagering gains and losses pursuant to § 6001. In addition, in each example below, the taxpayer complies with the requirements of sections 6.02 and 6.03 to use the session of play definition set forth in section 3.04 consistently for electronic play over the course of a day and over the course of separate sessions during the taxable year. Example 1. A taxpayer engages in electronically tracked slot machine play at X, a casino, by using a player’s card. On January 1, the taxpayer plays slot machines at X, for the first time that day, from 3:00 p.m. to 5:00 p.m. At 6:00 p.m., the taxpayer leaves X for dinner. Later that day, the taxpayer returns to X and plays slot machines from 10:00 p.m. to 11:59 p.m. The play at X from 3:00 p.m. to 5:00 p.m. and from 10:00 p.m. to 11:59 p.m. is a single session of play on January 1. Example 2. Assume the same facts as in Example 1, except that the taxpayer plays from 10 p.m. to 2 a.m. The play from 3 p.m. to 5 p.m. and the play from 10 p.m. through 11:59 p.m. constitute a single session of play. The play from 12:00 midnight to 2 a.m. is another session of play on January 2nd. Example 3. Assume the same facts as in Example 1, except that the taxpayer goes to another casino, Y, to engage in electronically tracked slot machine play from 7:00 p.m. to 8:00 p.m. The taxpayer has 2 separate sessions of play on January 1: (1) one session of play from 3:00 p.m. to 5:00 p.m. and 10:00 p.m. to 11:59 p.m. at X, and (2) 9 another session of play from 7:00 p.m. to 8:00 p.m. at Y. Example 4. On January 1, at 3:00 p.m., the taxpayer starts electronically tracked slot machine play at X for the first time that day. At 5:00 p.m., the taxpayer finishes slot machine play for that day and has payouts in excess of wagers of $300. For the single session of play on January 1, the taxpayer has gambling winnings of $300. Example 5. Assume the same facts as in Example 4, except that at 5:00 p.m., the taxpayer leaves the premises of X to eat dinner at a nearby restaurant. At 8:00 p.m., the taxpayer returns to the premises of X for more slot machine play. The taxpayer places wagers until 11:00 p.m. During the period from 8:00 p.m. until 11:00 p.m., the taxpayer’s wagers placed on electronically tracked slot machine play exceeded the total dollar amount of payouts from electronically tracked slot machine play earned by the taxpayer by $75. The taxpayer’s wagering gain for the single session of play at X is $225, the extent to which his payouts from electronically tracked slot machine play during that session exceeds the dollar amount of wagers from electronically tracked slot machine play. Example 6. Assume the same facts as in Example 4, except the taxpayer goes to another area of X and from 5:15 p.m. to 7:00 p.m., engages in additional slot machine play that is not electronically tracked. This revenue procedure applies only to electronically tracked slot machine play (the session from 3:00 p.m. to 5:00 p.m.). Therefore, the taxpayer cannot include the slot machine play from 5:15 p.m. to 7:00 p.m. in the session of play for January 1. Example 7. Assume the same facts as in Example 4, except that, three months later on April 1, the taxpayer returns to X for slot machine play, and begins electronically tracked 10 slot machine play at 6:00 p.m. For the slot machine play on April 1, section 6.03 of this revenue procedure requires the taxpayer to use a session of play that runs from 6:00 p.m. up through 11:59 p.m. (or earlier in that calendar day, if his play ends earlier).

To use this revenue procedure, a taxpayer must write “Revenue Procedure 2015-X” on Line 21 of the Form 1040, U.S. Individual Tax Return. A nonresident alien who is a non-professional gambler must write “Revenue Procedure 2015-X” on line 10, if a resident of Canada, or on line 11, if not a resident of Canada, on Schedule NEC of the Form 1040NR. A nonresident alien who is a professional gambler and uses this Revenue Procedure must write “Revenue Procedure 2015-X” on line 21 of the Form 1040NR.

This revenue procedure is effective for taxable years ending on or after [insert date of publication of final revenue procedure], except for section 7, which will be effective no earlier than taxable years beginning on or after January 1, 2016.

DRAFTING INFORMATION The principal authors of this notice are Amy S. Wei and Renay France of the Office of Associate Chief Counsel (Income Tax & Accounting). For further information regarding this notice contact Renay France at (202) 317-7003 (not a toll-free call).

Save Twice with the Saver’s Credit

If you are a low-to-moderate income worker, you can take steps now to save two ways for the same amount. With the saver’s credit you can save for your retirement and save on your taxes with a special tax credit. Here are six tips you should know about this credit:

1. Save for retirement. The formal name of the saver’s credit is the retirement savings contributions credit. You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans.

2. Save on taxes. The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.

3. Income limits. Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a:

• Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.

• Head of Household with income up to $45,000 in 2014 or $45,750 in 2015.

• Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.

4. When to contribute. If you’re eligible you still have time to contribute and get the saver’s credit on your 2014 tax return. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA for 2014. You must make an elective deferral (contribution) by the end of the year to a 401(k) plan or similar workplace program.

If you can’t set aside money for this year you may want to schedule your 2015 contributions soon so your employer can begin withholding them in January.

5. Special rules apply. Other special rules that apply to the credit include:

• You must be at least 18 years of age.

• You can’t have been a full-time student in 2014.

• Another person can’t claim you as a dependent on their tax return.

6. You figure your credit amount based on your filing status, adjusted gross income, tax liability and the amount of your qualified contribution. Other rules also apply. For more information on this or other tax questions, contact Ron Wilburn, CPA at (918) 212-9950.

101+ Small Business Income Tax Deductions

Brochures /Flyers
Business Cards
Copy Editor Fees
Direct Mall
Email Marketing/Newsletter
Graphic Designer Fees
Internet Ads (Facebook/Google/etc)
Leads/Mailing Lists
Marketing Services
Networking Event Costs
Print Ads: Newspapers/Magazine
Promotional Materials
Radio Ads
Television Ads
Web Design
Web Hosting & Domain Fees

Continuing Education
Books (Sales Books, Etc)
Continuing Education Seminars
Magazine Subscriptions
Newsletter Subscriptions
Sales Training/Coaching
Textbooks/Reference Books
Trade Publications

Business Mileage or
Actual Auto Expenses
• Car Washes
• Depreciation/Lease Payments
• Gas
• Insurance
• Interest
• Licenses/Registration
• Maintenance
• Repairs
• Tires
• Parking
• Tolls

Business Travel
Car Rental
Dry Cleaning/Laundry (while traveling)
Taxi, Train, Subway, Bus

Business Meals & Entertainment

Answering Service
Cell Phone
Fax line / Efax
Internet Service
Office Telephone
Toll Free Number Equipment

Business Equipment
Cell Phone/Smart Phone
Cleaning Equipment (Vacuum)
Equipment Repair
Hard Drives/Thumb Drives

Employee Wages
Clerical Support
Family Members (Kids/Spouse)
Payroll / Unemployment Taxes
Sales Agents

General Liability
Workers comp

Office or Home Office
Mortgage Interest/Rent
Real estate and personal property taxes
Security System

Office Expenses
Client Refreshments (coffee,water,soda)
Janitorial expenses
Office Furniture
• Desk
• Filing Cabinets
Office Supplies
• Envelopes
• Folders
• Paper
• Pens
• Postage
• Stationary
• Toner/Ink
Office Rent
Online Storage of Business Files

Professional Fees
Association Dues/Fees
• Professional association
• Chamber of commerce
Bank Fees
Bookkeeping Fees
Insurance License
E&O Insurance
Legal fees
CPA / Tax Planning & Preparation

Qualified Plans
Defined Benefit Plan
Self Employment Pension {SEP)
Simple lRA
Solo 401k

Start up Expenses
Costs Incurred before going into business.
Costs to setup LLC or Corporation

Fringe Benefits
Section 105 medical expense reimbursement plan
Section 125 cafeteria plan


“Stop wasting money on taxes that you don’t have to pay!”
We’re different. We don’t just record history by putting the correct numbers in the correct boxes on your tax return and calling it a day. We help you write history with a complete lineup of court-tested, IRS-approved concepts and strategies to give you the tax savings you really want.
Call (918) 742-2705 for your free “1040 Analysis.” We’ll find the mistakes and missed opportunities that may be costing you thousands, then show you how proactive tax planning can rescue those wasted dollars!

Your Average American Earning $200,000+

News from the desk of Ron Wilburn, CPA

IRS Reveals How “High Income” Earners Pay No Tax


The IRS “Statistics of Income” Division last release for high-income tax returns was SOI Bulletin Spring 2012. While we don’t expect it to challenge the latest John Grisham thriller on the bestseller list, the Bulletin actually appeals to an even bigger audience – anyone who wants to pay less tax!

The big news in this issue was this: in 2009, 3,924,489 Americans reported “adjusted gross incomes” of $200,000 or more. 20,752 of them paid zero federal income tax. Zip. Zilch. Nada.

Paying no tax is hardly remarkable. According to the Washington-based Tax Policy Center, this year 47% of Americans will pay no federal income tax. That’s because their income is so low, or because they qualify for enough exemptions, deductions, and credits to eliminate any liability. But making $200,000 and paying no tax – now, that’s an accomplishment. How did they do it?

According to the IRS, here are the items that produced the largest tax effects on high-income returns:

Interest paid (including mortgage interest and investment interest)
Taxes paid
Charitable contributions
Casualty and theft losses
Partnership and “S corporation” losses
Tax-exempt interest
You probably don’t want to count on “casualty and theft losses” to bail yourself out of a big tax bill. But you can count on one thing. Very few of those 20,752 lucky winners sat down to file their taxes and discovered their zero tax bill by surprise. Almost all of them did it through careful planning.

Do we sound like a broken record with the “P” word? Sorry, but that’s just too bad. Planning really is the key to minimizing your taxes. So, while we can’t promise planning will eliminate your tax entirely, we can tell you it gives you your best shot.

Are your friends, family, or colleagues grumbling about unhappy April 15 surprises? You can be a hero by helping them avoid those surprises. Let them know that we can help, with the right plan and the right concepts and strategies for them. And if you don’t have a plan of your own . . . well, you know where to find us!

Follow us on Twitter at @WilburnCPA and let us know how we’re doing.

Thanks for a great year.


Ron Wilburn
Wilburn CPA


Health-Care Reform: Replacing Myths with Facts

The Patient Protection and Affordable Care Act (ACA) passed in 2010 is incredibly broad in scope, so it’s probably not surprising that there’s a good deal of confusion about it, and a number of inaccurate and misleading claims that have been circulated. Here’s some information to help separate fact from fiction


Health Care Reform Myths

How to Report Gambling Winnings on Your Tax Return

Image courtesy of FreeDigitalPhotos.netRecreational gamblers must report their gambling winnings on line 21- Other Income on page 1 of Form 1040 U.S. Individual Income Tax Return.  The deduction for gambling losses is limited to the amount of winnings from wagering transactions I.R.C. § 165(d).  The gambling losses are reported as a miscellaneous itemized deduction on Schedule A.  Note, a taxpayer cannot take the standard deduction and still deduct his gambling losses.

The statute I.R.C. § 165(d) refers to gains and losses in terms of wagering transactions.  In order to calculate the gain or loss from wagering, the gambler would have to track each wager as a separate transaction and calculate the gain or loss per wager.  The Courts considered that interpretation as too burdensome and unreasonable according to IRS chief counsel advice memorandum A.M. 2008-011  December 5, 2008.  IRS chief counsel believes that the better view is that a casual gambler recognizes a wagering gain or loss at the time she redeems her tokens or cashes out of the slot machine. Wins that are left in the slot machine and used to continue wagering are not counted as income or winnings until the gambler cashes out and stops playing.

Shollenberger v Commissioner, T.C Memo 2009-306 determined that the Shollenbergers were recreational gamblers that should keep records of gambling wins and losses by sessions.  No court cases have defined the requirements of what constitutes a session, and the IRS has no clear ruling on the matter.  According to the Shollenberger case, on the day in question, they withdrew $500 from their joint bank account to take with them to the casino.  Mr. Shollenberger won $2,000 playing a dollar slot machine, and they each took $200 from his winnings to continue playing the slots.  They ended the day with $1,600, which they took to the bank and deposited the next day.  The IRS contended that the Shollenbergers should have reported the $2,000 jackpot as gambling income.  The court concluded that they net their winnings against the amounts wagered for that particular session of gambling.  The $2000 jackpot minus the original $500 minus the additional $400 wagered, resulted in a net taxable gambling gain of $1,100 for the session.  They should report $1,100 as gambling income on line21 Other Income of the Form 1040.  The Form W-2G that reported their gross winnings from the $2,000 jackpot should not be reported on line 21 as $2,000.

The IRS matches up the earnings reported on your tax return against the amounts reported to them from the Casino’s on Form W-2G.  If they do not match, you will most likely receive an IRS notice stating that you under reported your taxable income.  You should keep a log book of your wagering activity similar to a travel or mileage log book.

To help determine the beginning and ending of a session, consider the time, place, and activity.  Remember, when the chips are cashed in, that signals the end of the session.

Examples are as follows:

Time – When a gambler plays slot machines at the same casino for 2 days in a row, there are 2 separate sessions based on time.

Place – Playing the game on the same day at two different casinos is considered two separate sessions.

Activity – Changing from playing the slot machines to black jack would be considered changing activities and would be two different sessions.

Following is an example of a wagering log book and how the wagering gains and losses would be reported on your tax return.



Others present


Beginning Cash

Winnings Wagered

Net Gain or (Loss) from Session


River Spirit Casino

Joe Bob






Hard Rock Casino

Jim Bob






Million Dollar Elm Casino

Jim Meister






River Wind Casino

Jimbo Rama







(Amount per





In the example log book above, the taxpayer should report gambling gains of $1100 on line 21 for Form 1040, and gambling losses on Schedule A Itemized Deductions of $700.  The net amount is $400 gain, but notice that the income amount on line 21 would have been $12000 of gross income if the taxpayer had reported the gross amount per the Form W-2G.  A taxpayer’s Adjusted Gross Income or AGI would be substantially higher if this session method were not used.  Because the AGI is used in numerous phaseout of deduction calculations, the taxpayer can be penalized by not having kept a good wagering session log book.

If you want to make sure you are legally optimizing how you report your gambling income on your tax return, please call (918) 212-9950.  We will prepare your return and make sure you don’t pay Uncle Sam more than his legal share of your gambling winnings!

Creating Bank Rules in Xero Beautiful accounting software

There are two types of bank rules in Xero

  1. Spend Money Rule – applies to debit transactions
  2. Receive Money Rule – applies to credit transactions

Spend Money Rule

We will now explain how to create a spend money rule in Xero that will divide an amount between two or more general ledger accounts. 

Let’s say you use your auto in your business and after tracking your mileage for the IRS in a log book, you determine the business use of your automobile is 75%.  Each time you buy gasoline at QuikTrip you don’t want to have to manually code the transaction.  You can setup a spend money rule that will automatically code 25% of the expenditure to owner’s draw, and the other 75% to automobile expense.

Click the “Go to banking” link from the dashboard, then click “Bank Rules”.  Click “Create Rule” and choose Spend Money Rule.

Line 1. When money spent on the bank statement matches [  ANY  ] of the following conditions…

Description,  Contains,  QT

Line 2. Set the contact…


Line 3. Automatically allocate fixed value line items…

no entry required

Line 4. With the remainder, allocate items in the following ratios…

Description = gasoline,  G/L Account = Automobile expense,  Percent = 75%

Add a new line, and input the following

Description = personal gasoline,  G/L = Owner’s draw,  Percent = 25%

Line 5. Set the reference…

Set this to either “from the reference” or “by me during bank rec”

Line 6. Target a bank account…

Choose your desired business bank account.

Line 7. Give the rule a title…

Name the rule something like “QT gasoline allocation”.

Next time a bank statement item is downloaded with QT in the description field, this rule will automatically code the amount to the correct general ledger accounts and percentages.  You just accept it and you’re done recording and reconciling the transaction.  It should save you at least 50% of the time required to do it manually each time.  You can setup bank rules for numerous scenarios and each time you setup a new bank rule, it saves you time from now on and the reconciliation process gets faster and faster.

Check back often for more ideas to streamline your use of Xero beautiful accounting software, or better yet subscribe to our newsletter.

Want to talk to someone about how Xero can help your business?  Call us at (918) 289-8212.

IRS Tax deduction for business use of automobile

What is needed to take a tax deduction for using your auto in your business?

There are two methods that you can use to calculate the tax deductible amount.

  1. Standard Mileage Rate
  2. Actual Expenses

Standard Mileage Rate  Beginning on Jan. 1, 2013, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:

  • 56.5 cents per mile for business miles driven.
  • 24 cents per mile driven for medical or moving purposes.
  • 14 cents per mile driven in service of charitable organizations.

A taxpayer may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, the business standard mileage rate cannot be used for more than four vehicles used simultaneously.

Actual Expenses  You cannot deduct amounts that you approximate or estimate.  You must have a record of the actual amount of each expense. Receipts, canceled checks, entries on your bank statement will all be sufficient to prove the amount of expense.  You also need to provide the business destination and purpose.

Business and personal use.  If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your expense based on the miles driven for each purpose.

Auto Mileage Log Book   Keeping a mileage log book of your business miles and then comparing your business miles to all other miles driven will give you the business use percentage for the vehicle.  The IRS allows you to keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year.


You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. There is no other business use of the car, but you and your family use the car for personal purposes. You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year.

Smartphone Mileage App  There are some really cool apps available for your smart phone that will use the built in GPS feature to automatically calculate your miles driven for a particular trip.

  • Use the iPhone GPS to accurately track miles traveled.
  • Create an acceptable IRS mileage log
  • Email the log file to yourself so you can add to a spreadsheet
  • Enter purpose and destination

For those of you currently using Xero Beautiful accounting software, once you know your business use percentage, you can setup rules in Xero to automatically code the personal use portion of expenses to owner’s draw and the business use percentage to automobile expense.  To learn more click here.

Affordable Care Act and Health-Care Reform

Health-Care Reform: Looking Back and Ahead



Three years ago, on March 23, 2010, President Obama signed the Affordable Care Act (ACA) into law. While several substantial provisions don’t take effect until 2014, many of the Act’s requirements already have been implemented, including:

  • Insurance policies must allow young adults up to age 26 to remain covered on their parent’s health insurance.
  • Insurers cannot deny coverage to children due to their health status, nor can companies exclude children’s coverage for pre-existing conditions.
  • Lifetime coverage limits have been eliminated from private insurance policies.
  • State-based health insurance Exchanges intended to provide a marketplace for individuals and small businesses to compare and shop for affordable health insurance are scheduled to be implemented by October 1, 2013.
  • Insurance policies must provide an easy-to-read description of plan benefits, including what’s covered, policy limits, coverage exclusions, and cost-sharing provisions.
  • Medical loss ratio and rate review requirements mandate that insurers spend 80% to 85% of premiums on direct medical care instead of on profits, marketing, or administrative costs. Insurers failing to meet the loss ratio requirements must pay a rebate to consumers.
  • The ACA provides federal funds for states to implement plans that expand Medicaid long-term care services to include home and community-based settings, instead of just institutions.
  • The ACA provides funding to the National Health Service Corps, which provides loan repayments to medical students and others in exchange for service in low-income underserved communities.
  • Medicare and private insurance plans that haven’t been grandfathered must provide certain preventive benefits with no patient cost-sharing, including immunizations and preventive tests.
  • Through rebates, subsidies, and mandated manufacturers’ discounts, the ACA reduces the amount that Part D Medicare drug benefit enrollees are required to pay for prescriptions falling in the donut hole.

Major provisions coming in 2014

Several important provisions of the ACA are due to take effect in 2014, such as:

  • U.S. citizens and legal residents must have qualifying health coverage (subject to certain exemptions) or face a penalty.
  • Employers with more than 50 full-time equivalent employees are required to offer affordable coverage or pay a fee.
  • Premium and cost-sharing subsidies that reduce the cost of insurance are available to individuals and families based on income.
  • Policies (other than grandfathered individual plans) are prohibited from imposing pre-existing condition exclusions, and must guarantee issue of coverage to anyone who applies regardless of their health status. Also, health insurance can’t be rescinded due to a change in health status, but only for fraud or intentional misrepresentation.
  • Policies (except grandfathered individual plans) cannot impose annual dollar limits on the value of coverage.
  • Individual and small group plans (except grandfathered individual plans), including those offered inside and outside of insurance Exchanges, must offer a comprehensive package of items and services known as essential health benefits. Also, nongrandfathered plans in the individual and small business market must be categorized based on the percentage of the total average cost of benefits the insurance plan covers, so consumers can determine how much the plan covers and how much of the medical expense is the consumer’s responsibility. Bronze plans cover 60% of the covered expenses, Silver plans cover 70%, Gold plans cover 80%, and Platinum plans cover 90% of covered expenses.