Think you don’t need a log book to keep track of your business miles? Think again. If you want to be able to deduct those miles on your taxes, you absolutely need a written log book to track those miles.
How one business owner learned the hard way why you need a mileage log
In a recently decided court case, one taxpayer learned the hard way what can happen if you don’t keep a mileage log. In Taylor vs. Commissioner of Internal Revenue, Katrina Taylor claimed approximately 32,000 miles of driving for her medical collections business.
She claims the miles were racked up while she drove around seeking out health care providers and dropping off fliers. She tracked 136,456 miles on a spreadsheet with vague, inconsistent notes and with no receipts.
On the joint 2012 return she filed with her husband’s recycling business, they claimed $74,343 of vehicle expenses on Schedule C. When the IRS selected their return for examination, they determined that she did not keep the required records in order to claim those expenses.
The IRS concluded that even if she did drive the miles that she claimed, the vehicle expenses were not deductible due to the fact that she didn’t keep credible records. Not only did she and her husband owe the IRS the $13,385 of underpaid taxes for that year, but they were also hit with an additional accuracy-related penalty of $2,777.
Learn from their mistakes
Don’t make the same mistake. If you want to deduct vehicle mileage from your taxes, be sure to keep a mileage log book which clearly documents the miles, time, place and purpose for each trip. It also helps to keep corroborative evidence of your trips, such as a calendar or appointment book.
If you need assistance with how to properly keep a mileage log book or manage other business expenses, give us a call at (520) 321-4626.