by Sheila Askov
The sad truth…the most common reason taxpayers lose their deductions for business mileage during an IRS audit is because they failed to produce adequate records.
Avoid the trauma and drama by following these record-keeping guidelines:
- Write down your mileage
- Note the dates of your business trips
- Identify the places you drove for business
- Document the purpose of the business trip
The easiest way to keep track of legitimate expenses is to use a mileage logbook that you keep in your car. Whenever you jump in the vehicle to take care of business, grab the book and write down the date & beginning mileage.
It’s okay to combine entries sometimes. For example: You need to swing by the bank and post office for business reasons before you meet with a client. It’s acceptable to document all 3 stops in your mileage log under one entry, but remember to record the purpose & people involved in the client stop. Be sure and keep the post office receipt for future use, noting the business info necessary. Your bank statement will reflect the business transaction. When you complete the trip, grab your mileage logbook & finish the details including ending mileage.
Note: If you’re combining mileage entries as shown above, you may NOT conduct any personal business during that time. If you make a personal stop, the mileage chain is over and ‘ending mileage’ must be noted.
Tip: You may use a mile tracking app like MileIQ that uses GPS tracking to automatically calculate your mileage for each trip entered in the logbook.
The IRS wants to know the total number of miles you drive during the year, not only for business but commuting and personal use. They do not allow estimated mileage in your calculations. The IRS and Tax Court can disallow your mileage deductions entirely if you do not have precise, reliable records. It doesn’t matter if it’s clear that you did in fact drive for business during the year.
Beginning Jan. 1, 2016, the standard mileage rates are:
- 54 cents per mile for business miles driven
- 19 cents per mile driven for medical or moving purposes
- 14 cents per mile driven in service of charitable organizations
For precise, detailed IRS requirements visit www.irs.gov.