Why you Should Keep Records of Business Mileage for Tax Deductions
People whose jobs require a lot of traveling know how important it is to keep good records of their business mileage. However, there are some people who have no clue how to keep track of their records or may not even care enough to do so. By neglecting to keep these records straight, you won’t be able to include the expense on your business taxes, which means that you will miss out on a huge tax deduction.
In the worst case scenario, you might take the deduction, not knowing any better, and end up being audited by the IRS. Without any documentation to support your case, you can get in trouble. This article will tell you what you should do to keep track of your business miles for your tax deduction.
Record As You Go
The IRS expects to see your records that include a detailed daily log that shows the number of miles, destination, and purpose of business. The best way to keep track is to log your business mileage as soon as you reach your destination so that the information is accurate. You can wait until the end of the day to log it, but your memory might be foggy then. You might even forget to do it altogether!
To log business mileage the right way, you should include the date of travel, purpose of traveling, the point of origin, and your destination. Try to write down as many details as you can, including your client’s name. The address of your origin and destination need to be written down as well. Also, it doesn’t hurt to jot down expenses that you will reimburse your company later, such as gas and parking fees.
Use an App to Easily and Accurately Record Business Mileage
If you’re using a smartphone, you can find plenty of apps that can be used to record your mileage. The best thing about these apps is that they will separate your business miles from your personal miles. Because we, as social humans, are inseparable from our smartphones, you don’t have to worry about not finding the tools when you need to log. The same cannot be said about pen and paper. Also, you won’t lose your data as the information is stored in the cloud. As you record your overall mileage throughout the year, the apps will calculate a business-use percentage for you. You will be able to see how much your business mileage accounts for your total mileage. This information will be necessary for when you do your tax return.
Report Your Business Mileage For Tax Deduction Purposes
Once you have the information ready, fill it out on Schedule C of your business tax return. There are two methods for reporting business mileage: actual and standard. There are pros and cons for both methods, and you need to know how they’re different from each other before you choose your ideal option. Actual mileage has some restrictions attached to it as well, so you need to make sure that you’re well aware of them.
Keeping track of your business mileage doesn’t have to be complicated. By establishing good recording habits early on in the year, you will not lose out on your business tax deduction.
Timeero provides modern, affordable mileage tracking software for individuals, get in touch today to see how we can help!