Keeping mileage records for business travelers
Keeping mileage records is an important aspect of traveling for business. Not only will keeping accurate records ensure that you are reimbursed properly for your expenses, but having organized and complete information will result in much less stress at tax time. The IRS specifically asks if you have written evidence of your auto expenses and may refuse deductions if you don't. Here are some tips for business travelers on keeping mileage records.
Every employee who uses a car for business purposes, whether the car is assigned by the company or not, needs to keep accurate mileage records. If your workplace assigns you a company car, you will be responsible for keeping track of your business, and personal use miles.
The ratio of business to personal use miles will impact the amount the company will have to pay as well as the amount that is identified as a taxable benefit. For example, if an employee uses the assigned vehicle 90% or more for business purposes, they may receive a reduced standby charge depending on company policy. Their taxes will be reduced to reflect the business use of the vehicle. However, if the employee is using the vehicle more for personal use, this reduction in tax will not apply. Consult your company's policy regarding company cars to see how this will affect you.
It is equally important for employees using their own vehicle for business travel to keep mileage records, both for tax information as well as for reimbursement purposes. Your employer will usually reimburse you for expenses and it is essential that your records be accurate. Note that if your employer has a policy of reimbursing you for your mileage and you do not ask him or her to do so you cannot deduct these miles.
If your employer pays you less than the standard mileage rate, you may be able to claim the difference so it is important that you keep records of any expense or mileage reimbursements you receive. Make sure to record the round trip distance between your home and your place of work as well as the number of commuting trips you made during the tax year, as the IRS will require this information.
How to keep accurate mileage records
The easiest way to track your mileage is to write it down. Keep a pad of paper and a pen in the vehicle for easy recording. Most office supply stores sell notebooks that are designed for this purpose, sized to easily fit into the glove compartment for convenience.
On January 01 of every year, or the day you begin using the vehicle for business purposes, write down the odometer reading of the vehicle. Then, in columns for easy organization, note the date, the number of miles driven and the business purpose for each trip. It is prudent to keep records for other vehicle expenses as well. Record amounts spent on gasoline, car insurance, car washes, and repairs as well as fees paid for auto club memberships. Depending on your situation, all of these may be deductions and accurate records are important. Make sure to retain all receipts for documentation.
Things to remember when keeping mileage records for business travelers
- Commuting mileage is not deductible but the information will be required on your tax return.
- Fines and parking tickets are not deductible
- Medical mileage to and from doctors, pharmacists, dentists as well as mileage to volunteer for a church or non profit organizations are deductible at lower rates than business mileage if you itemize deductions.
Calculating mileage and expenses
- Subtract the beginning odometer reading from the ending reading for the total mileage for the year
- Add up the business miles for the year
- Add up the personal miles for the year
- Divide the number of business miles incurred by the number of personal miles to get the percentage of business use for the year
- Add up the expenses paid in the year
- Add up the reimbursements received in the year
- Add up the number of days worked in the year and multiply that number by the round-trip distance to and from work
- Use totals when preparing your tax return or give your numbers to a tax preparer
- Transfer the new odometer amount to a new notebook
Make sure to keep your notebook and records for at least three years. Chances are you won't need them again, however you do not want to be unprepared should the IRS need the information.
When keeping mileage records for business travelers accuracy and organization are important. Following the above steps will ensure you have everything you need.