September 6, 2019
One of the most important elements of creating a mileage log is whether the trip is categorized as a business or personal trip. When claiming your business-related expenses, you have to be able to prove the ratio of your business and personal trips. But what is business and what is personal?
According to the current law, only business trips from or to a partner or from a partner to a branch are considered business trips. So the trips made between our place of residence and our company (except for a few special cases) can NOT be considered as business trips! These trips are considered commuting, on which IRS has a constituted rule, called the IRS Commuter Rule. Commuting: transportation between your home and your main or regular place of work. Your main or regular place of work: the same job site for one year or more, where you’ve been working.
There are a few cases where commuting is deductible according to the IRS:
- If you are required for work to travel to another location, which isn’t your regular workplace or home.
- If you travel between your home and a temporary job, which you expect to work at for less than one year.
- If you travel between your main job and a second job.
- If you travel between your home and a temporary work location if your main job is at another site.
- If you travel from your regular workplace to a temporary job site.
- If you travel between a temporary work location and your second job.
- If you have a deductible home office, and you travel to your main job, this is considered as driving between workplaces.
And there is another exception. If your home is your main place of business: your headquarters or one of your branches. In our experience, commuting to work accounts for more than 20% of the business car use, and in fact, there are many cases where it is over 40%. If you are one of them, you might want to think about declaring your place of residence as your regular place of business.
It is extremely important to distinguish between business and personal trips. As the IRS is particularly strict in cases where it experiences an irregularity and has even developed sophisticated methods to control it.
For this reason, MileageWise also includes an automated system (Recurring daily trips) that makes it easy to record (of course, as a personal trip if your home is not your main place of business) the trip from your place of residence to work.
In conclusion, be careful about business and personal trips when preparing your mileage log. Avoid accidentally listing personal trips as business ones. Otherwise, you will have to face penalties. If you are uncertain of what constitutes as a personal trip, you should look into the applicable legislation, before the IRS penalizes you because of the inaccuracies in your mileage log!
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