written by Judy Gann
The standard mileage rate increased this year. Read our article for full details: 2013 Standard Mileage Rate Increase.
The IRS allows you to deduct business mileage, medical or moving mileage & charity mileage. This article explains the types of expenses you need to track and the methods you can use to properly and accurately track your car expenses, thereby maximizing your deduction and saving taxes.
Taxpayers can choose between a flat rate per mile for transportation expense and the actual cost based on the actual annual expenditures. If you choose the flat rate, maximizing those deductions on your income tax return are simple matters of maintaining a complete & accurate mileage log.
IRS requires adequate evidence or proof of the business portion of mileage and expenses. You should keep a mileage log, book, diary, receipts, trip sheets, etc. to support the expense deduction.
What to Record
You may create your own spreadsheet or buy a mileage book at an office supply store. You will need to track:
- Destination or Purpose
- Mileage Odometer
- Mileage Allocation
- Expenses (Gas, Oil, Tolls, Parking, etc.)
- Column for Amount Description
- Business expense columns: Entertainments/Meals – Lodging – Transportation- Other
Several clients use their calendars to record business travel. You must include:
- Date & time
- Name & destination
- Purpose of the trip
You will need to record your beginning mileage on January 1st and the ending mileage on December 31st. Your total mileage is needed to calculate the business percent of the use of the vehicle; this will determine which method benefits you the best – Actual or Standard Mileage.
Keeping Track of the Details
I keep an envelope in the glove box of my car for receipts of repairs, gas, oil changes, car washes, or other expenses on the vehicle. At the end of the year, these go with my tax papers to help prove my mileage. I write on the receipt the odometer reading if repairs and make sure it is dated clearly. If tolls, etc. for business, I write the client name/destination just for backup.
Some people write a check for cash back at the store or ATM and use it for gas, if so you need the cash receipt. A cancelled check for any expense alone does not prove what the business expense was for. So if you plan on using the cancelled check or ATM receipts, staple the receipt to it for your proof.
Try to enter & keep your log notations and records timely. If incomplete or inaccurate information is found to contain errors or omissions, it can result in tax deductions being disallowed as well as possible criminal charges.
Contact us if you have any questions about mileage documentation.