Mileage Logs: How crucial are they for business tax deductions?

In most court cases, taxpayers lose vehicle expense deductions because they cannot present a credible business mileage log.

In most court cases, taxpayers lose vehicle expense deductions because they cannot present a credible business mileage log. The IRS code forbids deductions for vehicle expenses when taxpayers cannot prove the mileage and provide an adequate record.

Having a mileage log is critical

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Having a mileage log is critical 〰️

Failing to maintain such records could lead to deductions far less than the actual business mileage, potentially resulting in no vehicle deductions at all. In essence, having a mileage log is critical for both proprietors and corporate owner-employees.

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Take the case of Jim and Martha Flake. During their IRS audit, they submitted reconstructed calendars, odometer readings, fuel receipts, credit card statements, and other documents. But they created the mileage log after the fact, and it contained math errors, thus failing to establish the mileage, time, and purpose of each vehicle use.

The court looked at the Flakes’ work and denied their vehicle deductions entirely. The court agreed with the IRS and allowed only what the IRS allowed.

The key takeaways from this real court case are:

• Maintain a mileage log throughout the year to substantiate your business mileage.

• Stay updated on the basic principles of the tax law regarding mileage and vehicle expenses.

• Operate your business with proper books, checks, records, and receipts to verify income and expenses. Don’t try to wing it.

How should I track my miles…is there an easy way?

First, you should know that two different mileage numbers will be needed by your tax return preparer:

• Grand total miles driven on the vehicle from Jan 1 to Dec 31st.
  Include both personal + business miles in this total.
  Easy button: Snap a digital picture of your odometer on Jan 1st and then again on Dec 31st.

• Total of business miles driven on the vehicle. Just business, not personal.

Second, choose a way to track the miles. Apps are the easiest.

• You can use an old fashioned pen and paper…that still works.

• There are many apps for your smart phone to choose from.
  Here are a few, but find the one that’s right for you.

  • MileIQ

  • TripLog

  • Hurdlr

  • Everlance

  • QuickBooks Online (the app has a built in mileage tracker)