Even when taking actual car expenses, gas, oil changes…. Mileage should be tracked on a daily basis – the same way you record in your calendar where you went, who you went to see and why, you also need to keep the miles.
On your tax return when you claim a deduction for auto expense there are two questions that being able to check “yes” to, is of major importance for a well prepared return:
- Do you have evidence to support business use?
- Is the evidence written?
In all seriousness the whole process might take you 5 minutes a day to properly document everything that might be necessary. Get a small planner, when you get in your car write down the mileage, where you are going, why, (personal or business), and who you met. When you get there real quick write down your mileage again.
Technically, any gas, parking, tolls that are under $75.00, you don’t need a receipt to back up each claim. Meaning if you claim $140.00 in gas and you filled up four times you won’t need the receipts to back that up in an audit. Personally I just find it easier to keep all my receipts so that I have an easy way to get my totals.
There are a great number of spread sheets out there on the net that you can find and use. Or take the above information and create your own with the information that best fits your situation. For those of you into techy gadgets, there are a lot of those out there that will do the job (and then some).
Always another way
I use Mile IQ. I recommend it highly. Check it out. The will give you 40 trips for free. If you are like me and 40 just isn’t enough, if you like it, here is a code to get 20% off… BMCF854A
In earlier years as a preparer I never really understood the “why” part of all the detail necessary. During an audit I saw several normally acceptable expenses refused by the IRS because the taxpayer went someplace that might have been for “personal reason” and no record of the purchase. Meaning if you go to Target to buy a new whatever for the office, in your journal, make sure and write that down. Just going to Target might mean you went to get gum. More than likely wouldn’t count as a deduction.
Need more info? You can check out the IRS page for Publication 463, that talks about car expenses, ask me or contact your tax preparer.
The more information you have the better you are if an audit comes your way.