Tips for Tax Mileage Deductions

Photo courtesy from Flickr Images by 401(K) 2012

You need to be smart about the way you go about claiming mileage for business. Expenses incurred for running a vehicle counts for a lot when you compute your net income.

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Use these tips to make the most of the mileage deductions allowed by the Internal Revenue Service.

Never Overstate Expenses

One reason why IRS would want to audit a taxpayer under schedule C is that they pad the expenses.

The IRS is fully aware of this fact because all the wage earners get a paycheck after a fortnight and a copy of the year w2 form is sent to the IRS through the social security administration.

So before the taxpayer files the returns to the IRS, the service already knows how much the individual has earned in the said tax year.

Be Careful with Vulnerable Expenses

Some taxpayers are tempted to overstate their costs. Certain expenses are a direct target for audit by the IRS including mileage expenses, auto expenses, meals and entertainment.

The substantiation requirements for these expenses is because they are the most likely to be exaggerated and they are the most difficult to reconstruct.

Use a smart technology such as GOFAR to track and log your mileage.

GOFAR helps you to find your car engine’s sweet spot and then guides you on driving efficiently to save fuel and reduce wear on your brakes.

Other areas where the GOFAR app and device can help you include;

  • Tracking the car mileage for tax deductions
  • Alerting you when the car has a fault
  • Explaining the car faults in plain English
  • Reminding the driver of ReGo & Insurance
  • Connecting drivers to top-rated mechanics and parts suppliers
  • Saving fuel by finding the engine’s sweet spot

Log Your Appointments

You are well advised to have all your appointments in one place so that you can be able to support your claim of the business errands that you run.

Do this is to have a paper organiser or an electronic calendar that says all the appointments that you had run during the year.

You will probably not send appointment record when filing returns with the Internal Revenue Service (IRS), but if the tax authorities require you to provide supporting documentation, you will have enough proof for your mileage claims.

Keep Contemporaneous Records

The IRS requires that you keep a good record of your mileage starting from the day you make your first business trip.

You are expected to check your mileage at the end of every day so that you ensure that your mileage app is up to the task.

This ensures that you have accurate records and that you don’t miss any mileage that you should have claimed and that you have enough supporting documents for you mileage claims.

Ensure It’s Easy to Reconstruct the Records

Sometimes you may forget to switch on the mileage app. In such situations, you will need to use your appointment book to reconstruct all the miles that you have travelled for business purposes.

Limit Your Claims to Qualified Mileage Expenses

Not every mile that you travel qualifies as business-related travel. You cannot, for example, log your commute to and from work as business-related travel.

However, you can count your commute from the workplace to meet a client as a business-related mileage.

When you drive home from either the office or from your last client during the day, you cannot count that as a qualified business mile.

Sometimes you may drop him on a client on your way to a personal vacation. This will not qualify as a businessman.

The real test for a business mile is to see if you travelled with business as the principal purpose of the trip.

Keep Separate Records of Commuting and Business Miles

The IRS considers commuting expenses as personal driving expenses. Differentiating between commuting and business driving is tough.

You can take as a general rule that the first and last drive between your home and regular place of work is considered commuting.

Determine the Rate to Use for Mileage Deductions

The best place to get information about the mileage rate to use is the Internal Revenue Service website ( The rate applicable to mileage changes on a yearly basis.

If you are calculating mileage for last year, you’re well advised to double check on the official IRS website to ensure that you’re not using the wrong figures.

Keep Your Documentation Safe

You must give the documentation that proves mileage covered for business for at least three years from the day you file your tax returns.

The IRS may request for the documentation to substantiate mileage deduction.

You are expected to have a copy of all the records that you have dispersed to the tax authorities.

Get organised by maintaining the documentation for each tax year separated.

Get a Professional to File Your Taxes

If you don’t have the time or the skills to file your tax returns, it is advisable to hire a tax consultancy to file the returns for you.

It is highly unlikely that returns done by a professional would attract the attention of the IRS.

Photo courtesy from Flickr Images by Pictures of Money

Understand the IRS Commuting Rules

The IRS rules on commuting make it very difficult to determine which drive from home is allowable for tax deduction.

Below are some insights that will give you clues as to which drives can be deducted:

  • Commuting is never an allowed tax deduction
  • Working during your community doesn’t turn your trip into a business drive
  • If you create a home office and prove that it is higher you earn a majority of your income, you can nullify the commuting by the IRS
  • Any drive between the home and a temporary place of work is tax deductible

Understand Which Mileage You Need to Log

You use a mileage log in the app; the IRS would require you to provide the following details:

  • Total mileage covered for business
  • The dates when you made the business trip
  • The places that you visited during a business trip
  • The purpose for which you travelled

It is important to remember that the IRS would require the total number of miles that you;

  • drove for business
  • drove for personal purposes
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