What do you know about the importance and value of accurate mileage logs? At first glance, a mileage log may look like an ordinary document lacking value, but there’s much more to it!
Think about the purpose behind a mileage log; often, business owners use mileage logs to calculate the amount of mileage reimbursement they owe their employees for business trip expenses incurred during business travels.
When preparing your documents for tax purposes, a mileage log is one piece of back-up you should maintain accurately. After all, you wouldn’t want to walk into an audit unprepared, lacking the right documentation, would you?
In this article, we’ll discuss the importance of tracking your mileage, the tips you need to know when tracking the business expenses you report in mileage logs, and the newest mileage rates, as released by the IRS.
Habit #1 – Aim for Accuracy
Too often, taxpayers get burned in tax audits because they don’t keep track of the mileage they deduct on their tax return, and keeping an accurate mileage log is a pretty simple thing to do.
If you get audited, you’ll want to have the most accurate mileage log that you can provide. After all, if you’ve been deducting incorrect mileage information on your tax returns, you may find yourself in a world of trouble with the government, since the IRS requires you to back up any mileage deductions you claim on your tax return.
In other words, keep accurate documentation for any claims on your tax return!
Habit #2 – Know the Current Standard Mileage Rates
Keep up with the current IRS mileage rates, so you can correctly calculate your rates (or use a mileage log application that automatically calculates everything for you).
The 2019 standard mileage rate was 58 cents per mile driven for business use; that’s up 3.5 cents from the rate for 2018.
The 2020 standard mileage rate is 57.5 cents per mile driven for business use; this has decreased since 2019 by just a hair.
Medical and Moving Driving
The 2019 standard mileage rate was 20 cents per mile driven for medical or moving purposes; that’s up 2 cents from the rate for 2018.
The 2020 standard mileage rate is 17 cents per mile driven for medical or moving purposes; this shows a decrease of 3 cents per mile.
The 2019 standard mileage rate was 14 cents per mile driven for charitable organizations. The 2020 standard mileage rate remained the same at 14 cents per mile.
For more information on the latest tax brackets and tax rates, check out our Tax Rates page.
Remember to use the right mileage rate when doing calculations for your mileage log!
Habit #3 – Keep Proof of Your Mileage
Are you looking to claim vehicle expenses on your tax return? A vehicle mileage log that keeps track of accurate information, such as total miles driven, is all an IRS examiner needs to see as proof of your vehicle’s business use.
Be aware that without an accurate mileage log, you should not try to take vehicle expense deductions.
Note: Many rideshare companies offer free mileage logs that you can easily download. See if this is the case with the company before making that assumption.
You need a mileage log if you want to deduct mileage on your tax return!
Habit #4 – Seek Wise Counsel
Habit #5 – Plan Ahead
Most auditors will dig a little deeper if you show up without a mileage log, so maintain one. The last thing you want is to end up with an unexpected tax bill, so maintain the proper tax documents during the tax year.
Document your mileage usage even if you aren’t expecting a tax audit because you never know!
Habit #6 – Maintain Detailed Expense Records
Are you planning to claim vehicle expenses on your next tax return? Use IRS Form 4652 to record expenses for up to six vehicles used by a sole proprietor, corporation, or partnership.
Evidence to support the business/Investment use of your vehicle should include the following information. Use this as a guide when filling out the form and so you know what to keep track of during the year.
- The total business miles, commuting miles, and/or personal miles on each vehicle
- Copies of repair receipts, inspection slips, and records that show the total annual mileage
- Copies of logbooks and other records to support the total business mileage claimed
- A copy of your appointment book or calendar of business events/activities for the year
- Copies of every paid bill, invoice, and/or canceled check, including those for all vehicle expenses (gas, oil, repairs, insurance, interest, license plates, taxes, parking fees, and tolls)
- A copy of the bill of sale or other verification to establish your basis in each vehicle, including the trade-in values on vehicles you traded for your current one
Make sure the odometer readings match your mileage log; you may be able to compare the mileage between repair stops to see if it ties to the mileage you claim on your taxes.
Keep detailed records for back-up documentation!
Habit #7 – Use Tools that Make Life Easier
There are several tools that you can use in your daily business life that will make keeping a valid and useful mileage log easy and will safeguard the back-up documentation for the tax deduction of your vehicle expenses.
One such mileage application solution is TRIPLOG.
This is a free application that uses the GPS on your smartphone to help you keep up with mileage tracking in a user-friendly mileage log template. Paid Versions, less than $6.00 per month, come with custom tax compliant reports and other advanced features.
Find and use a mileage tracking tool to make things easier for you!
Borshoff Consulting offers tax consulting and many tools and packages to help you run and grow your business while keeping up with the latest tax laws. Employ the help of a trusted tax advisor who will deliver the highest quality of work on your behalf.
Are you concerned you may be audited, or have you already received correspondence from the IRS? We can help represent and prepare you for a tax audit. We are also fully qualified to help you with your annual tax return and/or business consulting needs. You can trust Indiana’s tax expert!