Keeping Track of Business Mileage - the Easy Way
Some business owners and employees who travel keep excellent records of business mileage, but for the rest of us, it's a huge chore. But if you don't keep these records the right way, you can
- Not include the expense on your business taxes, missing out on a large tax deduction, or
- Take the deduction and get audited, and have the IRS tell you the deductions don't count because you didn't do it right.
Keeping track of business mileage is important, no matter which way you claim the mileage deduction - taking the standard deduction or actual expenses, so you might as well do it right.
The Right Way to Keep Business Mileage Records
There is only one way to keep track of business mileage. The IRS wants "timely and accurate" records. They expect you to keep a "daily log showing miles traveled, destination and business purpose." That means you must keep an "at-the-time" log of this mileage.
You can't deduct what you can't prove, so you must capture the business information to take the deduction. The best way to do this is to keep a small log book in your car and write down 3 pieces of information about every business trip:
- Date of travel
- Purpose (client name, or another business purpose, like banking, meeting with CPA), and
- From/to. Write down where you left from (home, etc.) and the address or some information about the place where you are going. You can record the actual mileage if you want, or you can add this in later from a map program on the Internet. The important thing is to record where you started and ended the trip.
If you think you may be using actual expenses, rather than the standard IRS mileage deduction, include information on any expenses, like gas/oil, and the amount.
If you use the same car for business and personal use, you must also record the mileage at the beginning and end of the year so that you can calculate a business use percentage.
Capturing Your Information the App Way
If you are connected permanently to your smart phone or iPhone, you can find an app that records your mileage and separates business miles from personal miles. I use Everlance, but look around and find one that works for you.
IRS Requirements for Mileage
Business Mileage and Taxes
After you capture and record your business mileage, the next step is how to include this information on your business tax return. The two methods of reporting mileage are "actual" and "standard." This article explains the difference between the two mileage reporting mileage; there are advantages and drawbacks to each, and there are also some restrictions on reporting actual mileage.
Bottom Line: Start now to keep track of your expenses for business use of your car, even if you don't think there will be many business trips. Getting into the habit in January is better than losing out next April.