The IRS’s Publication 463 describes what your mileage log should consist of:
“If you use your car for both business and personal purposes, you must divide your expenses between business and personal use. You can divide your expense based on the miles driven for each purpose.”
Did you know that if you want to claim your business mileage on your taxes you have to be able to prove your trips with the help of a mileage log?
The Necessity of Recording both Business and Personal Trips
Most accountants, bookkeepers, and tax advisors say that it is enough to record your business trips and their related odometer readings. Even worse, they might advise you to take the deduction without any supporting documentation such as mileage logs. The reason behind this misconception is mostly the name of the deduction, i.e. “business mileage deduction.” The fact that the IRS terms it this way does not mean that you don’t have to prove your personal miles as well.
Your mileage log has to consist of:
- The total mileage you drove in the tax year for business, commuting, and personal driving
- The first and the last odometer reading of the year
- The dates of your business trips
- The addresses of the business clients/locations you’ve visited
- The ratio between your business and personal trips
- The purpose of your trips (e.g. office meeting, personal shopping, etc.)
If you do not have proof of your personal mileage, you will not be able to prove the ratio of your business and personal trips.
Although the IRS doesn’t require personal trips in your mileage log, it’s strongly recommended that you include them because it will provide clarity for both yourself and the IRS since you need to separate your total business mileage, total personal mileage, and total commuting mileage for the year.
Also, logging your personal trips boosts the proficiency of MileageWise’s built-in IRS auditor function, which you need for an IRS-Proof result.
When accountants ask for their client’s business mileage to be able to add it to their tax forms, most taxpayers just give an estimated number calculating approximately how many business miles they might have done.
Then, when the IRS asks for additional supporting documentation, the taxpayers don’t know how to reconstruct their mileage logs to prove that estimated amount, since it was not based on real-life driving habits and/or actual driven miles.
Not having correct documentation will surely lead to a fine
During an audit, the IRS can ask you to prove your miles with supporting documentation. You can’t deduct what you can’t prove. If you can’t prove the deduction, your business will be subject to fines and penalties for underpayment of taxes.
Don’t leave money on the table. Losing a deduction opportunity especially during this pandemic and on top of it paying penalties for failing to meet the requirements of the IRS can be extremely damaging.
The best solution is for you to know what needs to be included in your mileage log or to find a qualified accountant/tax advisor who can correctly inform you about every tax deduction possibility and every tax matter at hand. In the current economic situation, every penny counts, and an average taxpayer can save as much as $12,000/year on average with mileage logs.
With MileageWise’s mileage tracker app, you can easily track your business trips, personal trips, and refuelings on the go. The AdWise Wizard feature will make an IRS-proof mileage log recommendation for you by taking into account all the legal regulations about mileage logging and tax return policies. Using this technology your mileage log will correspond to the exact mileage you have driven according to your odometer, even retrospectively.
In the process the built-in IRS auditor checks and corrects 70 logical conflicts with a smart algorithm ensuring that your mileage log will be IRS-proof, meeting every expectation.
Didn’t set up your mobile app correctly and missed some trips? Didn’t keep track of your mileage at all?
No worries! Let our Google Timeline import function take care of your lost trips!
For this, we strongly suggest that you turn on Location History in your Google account, which automatically tracks each and every one of your trips.
If anything happens in the future, you’ll have your trips in Google Timeline, which you’ll be able to convert into an IRS-approved mileage log with the help of MileageWise.
IMPORTANT: This method does not substitute using a mileage logging software such as MileageWise, but gives you an extra backup in a cloud that can save you thousands of dollars when transformed into a real mileage log.
If you are still worried that you can’t keep track of your mileage, our experts will take care of it. They will be more than happy to help!
Useful links for mileage logging
- Calculate your past odometer readings
- Estimate your actual fuel consumption
- Publication 463, Travel, Gift, and Car Expenses
- Topic No. 305 Recordkeeping
- Publication 583, Starting a Business and Keeping Records
- Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ)
Useful articles about mileage logging
- What to pay attention to when deducting your Mileage if you’re Self-employed
- What to do if you realize you should’ve kept a mileage log?
- IRS Fines and Penalties for Insufficient Mileage Documentation – Explained
- You have 3 years to claim your Past Mileage: Reconstruct your Mileage logs with MileageWise
- Up to your ears in work? Let us make your Mileage logs!
- How can the IRS-Proof Mileage Log Creator help you create the Perfect Mileage log
- 4 tips to get an 80% business use ratio easily and legally