Is your mileage tracking IRS compliant?
Any business mileage submitted to the IRS is likely to be closely scrutinized, and your mileage log is the most important piece of evidence for this. The reason: Mileage can be an enormous deduction for tax filers and the IRS knows how to quickly find record keeping mistakes that could wipe out your entire deduction. Here’s how you can avoid common mistakes when submitting your business mileage.
Don’t wait until the end of the year to make something up. Even if you think you have a “sense” of how much you drove for business and you attempt to re-create a log before filing, chances are it will be missing some key information. This could lead you to losing your entire mileage deduction.
If you drive 200 miles a day for ridesharing for example, at the current 2015 per mile rate of $0.575, you could deduct $115 per day. Chances are that’s a major portion of your daily income - and would be a huge hit if you lose out on.
Don’t leave out the business purpose in the log. Even if you diligently keep track of the mileage for each trip and starting locations, if you don’t have the purpose of the trip written down, there’s a good chance the IRS may throw out your deduction. The purpose helps substantiate the mileage you’ve written down. It doesn’t have to be a complicated description, just a clear way of identifying the business purpose for each mileage recorded.
Don’t try to cut corners. This is really meant to underscore the above points: Don’t try to take shortcuts when keeping track of your mileage and business purpose. If your record is sloppy or not clear, it will raise questions. And if your descriptions are too vague, this will also raise questions.
To take the above mileage example, if you drive 200 miles a day even for only 150 days of driving, that’s 30,000 miles a year, or $17,250 in potential deduction. It’s fair to say it would be a disaster if you lost out on this deduction.
The good news is it’s easy to avoid some of the above problems. Here’s what the IRS requires for record keeping: Your mileage for each trip, the places you drove for those trips, the purpose of those trips, and the date of those trips.
The best way to keep track of this is when your taking these trips, such as the same day or right after you complete the trip. The reason for this is: Most people are bad at guessing or forgetful, and keeping a record as soon as possible minimizes these risks.
One other note: The IRS also wants to see the total number of miles you’ve driven during the entire year, for business, commuting, and personal driving. It’s a good idea to jot down your year beginning and end odometer readings too.
You can either track this mileage in a paper log or with an app. SherpaShare is compliant with the above requirements, and the best part is, it uses GPS tracking to accurately track all of your mileage. All you have to do is categorize the type of trip and purpose.
Whichever method you use, be sure to keep a record. You cannot simply wait until the end of the year and make up a number. For more information, here’s the IRS publication on Recordkeeping.
irs, mileage tracking, compliance, mistakes, mileage deduction
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