Posted By Stephen Fishman,.Posted in Mileage.Tagged
Vehicle Mileage Log: How Do You Keep Track Of Business Mileage?
The IRS scrutinizes the mileage deduction because many taxpayers abuse it. The most common reason people lose this deduction is lack of adequate records. If you face an IRS audit, make sure your mileage log meets the IRS’ requirements.
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According to the IRS, your mileage log must include a record of:
- Your mileage
- The dates of your business trips
- The places you drove for business
- The business purpose for your trips.
The IRS also wants to know the total number of miles you drove during the year for business, commuting, and personal driving other than commuting.
By far the best way to prove to the IRS how much you drove for business is to keep contemporaneous records. “Contemporaneous” means your records are created each day you drive for business, or soon thereafter.
To keep track of your driving, you can use either a paper mileage logbook that you keep in your car or a mileage tracker like MileIQ to automatically calculate your mileage for each trip.
Remember, you are not allowed to make estimates of your mileage. Below, we’ll go through a few examples of vehicle milage logs that didn’t satisfy the Tax court. This just shows that a mileage log template, mileage log spreadsheet or mileage log book may not be always be enough.
Vehicle Mileage Log Mistake #1
Jim Chapin, a California real estate broker, used his Toyota Sequoia SUV for his real estate business. He figured he drove a total of 11,135 miles for business one recent year. He deducted $5,309 for car expenses. The IRS audited him and disallowed the entire deduction. Not only that, it also added on a 20% negligence penalty.
Jim appealed to the Tax Court and lost. Jim did not keep a detailed log of his drives each day, week, or month. He didn’t have a milage tracker automatically creating records. He instead created a handwritten log when he learned the IRS was auditing him.
Jim also had an itemized list for the costs of fuel, insurance, parts and more. Yet, these lists didn’t include business purpose for the trips, nor reported the mileage traveled or the amount of each trip expense. The Tax Court found these records weren’t enough and denied his entire $5,309 deduction. (Chapin v. Comm’r, T.C. Summ. Op. 2014-31.)
Mileage Log Book Mistake #2: Not Keeping The Right Info
David Garza did a better job than Jim of creating his log. He kept records in a calendar planner book. He’d record his truck’s odometer readings at the start and end of each month. Some other months would including more readings and some wouldn’t. It wasn’t as consistent as a mileage tracker that logged all of his miles.
The calendar planner also had some personal notes, but didn’t include other vehicle expense info. David did not record any of his personal travel in the calendar.
David claimed that he drove over 40,000 miles for business in 2010. This resulted in a $20,085 deduction. The IRS and Tax Court denied his entire deduction. His calendar was not a reliable substantiation for his claimed mileage expenses. The Tax Court said this milage log needed the time, business purpose or other costs. (Garza v. Comm’r., T.C. Memo. 2014-121.)
Mistake #3: Too Many Errors
Even a mileage logbook that on its face looks pretty good may not pass IRS muster. A good case in point are Mr. and Mrs. Moore, who operated a real estate brokerage business in Texas. They each kept a mileage logbook consisting of 12 pages, one page for each month of the year.
Each page contained entries for each day of the month, including odometer readings, miles driven (sometimes designated as “commuting” and sometimes as “business”), and the purpose for the trips. The Moore’s each typically drove over 100 miles per day for their business and claimed a total $31,840 mileage deduction for the year in question.
Unfortunately, the IRS and Tax Court denied their deduction. The Court said that the logbooks were not reliable because they contained too many errors and questionable entries. For example, they did not contain the name of a single person the Moores claimed to have visited for their business.
Instead, the business purpose of their driving was stated in general terms, such as “OPEN–Review Task Log–Close Office” or “OPEN–Review Contract–Close,” or “Open–Update Website–Close.” (Moore v. Comm’r, TC Summ. Op. 2012-16.)
Stephen Fishman
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