Every year I get multiple questions about vehicles and how to write them off for a business. There is never a better time to discuss the importance of keeping track of your mileage then today, National Odometer Day. Did you know the odometer has been around much longer than the car? The odometer was first used in Ancient Rome to calculate the distance between cities. That is exactly what it is used for today – to show how far you have gone.
Keeping a mileage log is the most important information you can have to keep your business healthy. Why? Because the IRS requires a mileage log for much more than just taking a deduction for your automobile. The IRS has been known to use a mileage log (or lack of one) to do everything from re-classify a business as a hobby to dis-allowing all vehicle expenses. Normally it is the lack of a mileage log that causes the problem; however, a mileage log that is inaccurate can cause a problem, too. Such as the one a taxpayer used, who had indicated he was on a plane and driving his car at the same time can be just as devastating to your taxes.
It does not matter if you use the standard mileage deduction, or actual expenses for your vehicle – you must have a mileage log. It’s not optional – no matter what kind of a business you have. Even if the vehicle is used 100% for business you must have a mileage log – the reason is that the IRS knows that at some point you will stop at the grocery store in the company car.
Recently, the tax courts disallowed a common method of doing mileage which was to use your calendar and just calculate based on what appointments you have. This method was shown to be inadequate to show that you actually went to the meeting. A millage log is the only way to show your actual vehicle expenses.
Keeping a mileage log is very easy, nowadays, there are tons of apps that can be put on your phone to track your mileage. There is no longer an excuse for not having one. Make sure when you are choosing an app, that the information can be downloaded or printed out, and make sure you do that at least once a month in case your phone takes a bath, gets run over by a monster truck, or sucked away by a Sharknado. Some of these apps use the GPS in your phone to track mileage and others, you must put the odometer reading in each time. Choose one that you will use on a regular basis.