What You’ll Learn Toggle 1. Hard to Read Mileage Log2. Post-Dated Mileage Log3. Discrepancy in Supporting Documents4. Failure to Account for Federal Holidays and Vacations5. Unbelievable Mileage Numbers6. Filing Identical Mileage Distances7. Calculation Errors on Mileage Numbers8. Leaving Unexplained Gaps in the Mileage Log9. Including Commuter Mileage on Claims10. Claiming 100% Business Mileage11. Ignoring the Provisions of the Tax Cuts and Jobs Act12. Exaggerating the Expenses13. Poor Record Keeping14. Mixing Up Commuting and Business Miles15. Lack of Tax Filing Expertise16. Using Different Mileage Deductions Methods for Your Claim 1. Hard to Read Mileage Log If you decide to use a handwritten mileage log, it must be in a readable format or the IRS will reject it. The best way to avoid rejection and automatically log your mileage is to use smart technology such as GOFAR. GOFAR will find your car’s engine sweet spot and then train you to drive efficiently to save fuel and reduce wear and tear. Other areas where GOFAR is useful in your car include: Finding engine faults and communicating them to you in plain English Reminding you of scheduled maintenance visits and insurance payments Connecting you with the best parts suppliers and top-rated mechanics in your area (in Australia) Helping you save up to 30% on fuel spending 2. Post-Dated Mileage Log The IRS will not accept any mileage that has been recorded after the fact. What this means is that all the mileage you log must have a time and date stamp on it. Anything added after the stamped timeline will not be accepted. It will also tip off the IRS to start an audit of your log, which is something you don’t want. 3. Discrepancy in Supporting Documents The IRS requires you to produce all supporting documents when you file your mileage. These documents are used to substantiate your mileage claims and therefore, must correlate with the mileage log. There are also a few problematic expenses the IRS takes a lot of interest in. They include entertainment and meal expenses. The reason why the IRS takes particular interest in this is because they are susceptible to exaggeration and they’re also the most difficult to reconstruct if not logged properly. For instance, the cost of fuel indicated on the petrol station receipt must correlate with what you file on your mileage claim form to avoid discrepancies. The IRS is at liberty to discredit any logs that have discrepancies. 4. Failure to Account for Federal Holidays and Vacations Most American workers do not work during federal holidays. They also take at least two weeks of vacation every year. You need to account for this absence on your mileage log. As a best practice, switch off your mileage logging app during these days. That ensures you avoid having the personal mileage incurred during this time being counted as business drives. 5. Unbelievable Mileage Numbers What are the chances that the miles you’ve driven through the year come to a round number such as 10,000 miles? Highly unlikely. If you file claims with such a round number, it will be an instant red flag to the IRS auditors. Instead, file claims for the mileage displayed on your mileage app regardless of whether that number has some decimal points. 6. Filing Identical Mileage Distances Even if the distance from point A to B is constant when you move in a straight line, the mileage will be different depending on factors like: the traffic lane changes alternative routes taken When claiming mileage, you should use the mileage indicated on the mileage logging app instead of estimating the distance. 7. Calculation Errors on Mileage Numbers The IRS understands that keeping an accurate mileage log is tedious. However, this task has been made easier by the use of a mileage tracker. Instead of trying to add up your mileage at the end of the day manually, you’re better off using an app that will automatically log the miles and give you the total distance at the end of the day. Remember to switch off the mileage logging app when you’re doing personal errands to avoid the mileage being added up as business mileage. You should also ensure that every mileage you claim has been recorded according to IRS requirements. Your odometer readings should match the distances, tolls, and any other expenses in an IRS-compliant format. 8. Leaving Unexplained Gaps in the Mileage Log Unexplained gaps in your mileage log will raise a red flag since it is an indication of sloppy mileage tracking. The IRS would want to establish why there is a gap in your mileage log. 9. Including Commuter Mileage on Claims The IRS defines commuter mileage as the transportation between your home and your regular place of work. Commuter miles are not deductible. So, if you include commuter miles, they will be disallowed. An example of some mileage that can confuse you while filing your returns is when you drive from your office and then drop in on your last client of the day. According to the IRS, this is not business mileage as it will confer a benefit on the taxpayer since they will be trying to recover the commuting mileage by dropping in on the customer. Another example is when you drop in on a client on your way to a personal vacation. Again this will not be considered business-related mileage because business was not the primary reason you took the drive. However, you can beat the commuter mileage rule by converting one of the rooms in your home into an office and get it qualified as your main business location, where you do most of your administrative work. 10. Claiming 100% Business Mileage It is inconceivable that all the miles you drive throughout the year will be for business purposes. There is all likelihood that a part of those miles will be driven for personal reasons. The IRS will raise an audit query if you claim 100% of your mileage is business drives. To avoid this, you need to create a log with a small percentage of personal travel, and a larger percentage of business travel to avoid raising IRS red flags. 11. Ignoring the Provisions of the Tax Cuts and Jobs Act In 2018, the Tax Cuts and Jobs Act (TCJA) started being implemented and removed the right of workers to deduct automobile expenses. If you are a worker who regularly drives for business reasons, you will need to carefully inspect your company reimbursement policies. Negotiate a better salary in exchange for the car expense deduction outlawed by the TCJA. 12. Exaggerating the Expenses The taxpayers under Schedule C are usually self-employed individuals. Examples of these taxpayers include independent contractors, freelancers, and statutory employees such as plumbers, masons, painters, and truck drivers on contract with a particular company. One of the main reasons the IRS would want to audit a taxpayer under Schedule C is they tend to exaggerate the cost of running vehicles. The IRS is aware of this phenomenon and pays close attention to such taxpayers’ files. If you are a worker under the W2 form, a copy of your paycheck is always sent through the Social Security Administration to the IRS. Therefore, the tax authorities already know how much you earn before you file your return. As such, when you’re ready to make your mileage claim, ensure that all the expense records you need to calculate and verify your mileage are in order. 13. Poor Record Keeping Image from pixabay Starting from the day you make your first business trip, the IRS will require properly kept mileage records. Ensure you check your mileage log at the end of every business day. This will ensure that you have accurate records and that there is no missing mileage that you should have claimed. You also need to keep a proper record of all the supporting documents you need to file along with the mileage claims for filing your tax returns. 14. Mixing Up Commuting and Business Miles You are expected to know the difference between personal and business driving expenses. Commuter expenses that you incur are considered personal expenses by the IRS. So when filing your returns, ensure that you do not make the mistake of including personal miles as part of your mileage deduction. As a general rule, remember that the first and last drive between your home and regular place of work is considered commuting. The following are the details that should be in your mileage log; The total mileage during the year Total mileage done for business Total mileage done for personal reasons The dates when the business miles were done Places visited when you incurred the business miles The purpose for which you travelled 15. Lack of Tax Filing Expertise Bookkeeping and tax returns filing is a professional task. If you do not have the competencies and time to file your returns with the IRS, you are well advised to hire a tax consultant. Most taxpayers under Schedule C do not have the expertise to keep the records which they will use to substantiate their mileage claims. Since ignorance of the law is no defence, get someone who can do the work without errors. The expert will advise you on which expenses to file and which ones to leave out. They’ll also help you find a workaround for any stringent commuting rules, so you avoid getting in trouble with the IRS. 16. Using Different Mileage Deductions Methods for Your Claim In any particular year, there are different available mileage deduction methods. Currently, there are two methods that you can use to deduct your mileage. The first one is called the standard mileage rate. Its rates get adjusted by the IRS by taking into consideration the prevailing economic conditions. The second one is the actual expense method where the taxpayer is supposed to collect and file all the expenses incurred in running a car for business purposes. The best place to get this information is the IRS website. You can only use one of these methods to calculate your deductions. So weigh the pros and cons of each to decide which one would give you the highest legal deductions for your mileage.