How to Maintain Mileage Sheets to Avoid IRS Audit Traps?

If you want to claim IRS deductions for business miles covered in your personal vehicle, it is important to keep a proper record of the total mileage. It helps in reducing your tax burden and offer better insights about the amount that qualifies for deductions from the total income. Here, you should remember that these deductions are not allowed on estimated expenses. Instead, it requires accurate and timely mileage sheets that can convince IRS about the authenticity of your claims

A digital version of mileage logs is a better option for record keeping. The physical books can be damaged, while digital formats can be retained for a much longer time. Preferably, you should keep these sheets well-maintained for at least 5 years after filing the claims for deduction. Using these records, you can differentiate between personal and business use of a car to prepare for annual taxation. Here are some important things that you should know about preparation of these logs:

The Inclusions in the Sheet:

Mostly, the taxpayers make some common errors when choosing the inclusions of their mileage logs. At the time of preparing these sheets, you should clearly mention the purpose of every trip. Do not include personal expenses or mileage commuting to work in this sheet or use estimated numbers instead of exact figures. People are often confused about the mileage commuting.

In this regard, IRS has clearly specified that driving from your home to the workplace, office, or specific business purposes will be considered as commuting and it will not be qualified for tax deductions unless you have declared a home office. The rules are quite stringent, and you should do a proper documentation including the starting and ending mileage each year. Also, include the date of every trip, the starting point, destination, and related expenses incurred during it.

Understand the Eligible Deductions:

IRS has stated some clear rules about the eligibility of business miles for tax deductions. Your mileage sheets should not include daily commute. But, you can claim deductions for the cost of traveling to another official address than your primary office. Apart from this, you can claim deductions when traveling for business events, conferences, dinner, or luncheons.

The Right Way of Calculating Deductions:

Two methods are specified for calculating the deductions under the specifications of IRS. First is the standard mileage rate stated by IRS every year and second is actual expenses method. Under standard deductions, every mile driven for business purpose is deducted using a standard rate that is fixed by IRS every year. In this method, you cannot deduct the registration fees and other operating expenses. On the other hand, you can claim deductions for every expense made for business purposes to calculate the amount.

This can be a complex procedure. Therefore, you should prefer using an automated mileage tracking app for accuracy and consult with an accountant before submitted a mileage claim.

Frederick W. Daily, J.D, LL. M (tax)
Frederick W. Daily, J.D, LL. M (tax)

Fred Daily is a tax attorney with over four decades of experience in the tax field. He has given tax programs for CPAs, Enrolled Agents and even the IRS. Fred has been quoted in the New York Times, Wall Street Journal, and has appeared on CBS, NBC, Fox, NPR news features and ABC’s Good Morning America. He is an author of books on taxes and his website, taxattorneydaily.com features a wealth of tax tips for minimizing taxes and dealing with IRS issues.