Did you know that most exams of personal returns with a Schedule C (Self-Employment) include requests for information on Car and Truck Expenses? While the IRS recommends contemporaneous mileage logs, it does not require them. Mileage logs may be accepted in an audit if completed on a weekly or monthly basis, or even if completed prior to audit if the records are considered to be adequate.
What are adequate records? First, a mileage log must be in writing. If it is not written, it is not deductible. Don’t go into an audit with a story or theory. A Perfect Mileage Log will contain –
- The Date of Each Trip
- Where you drove, who you met, and the Business Purpose
- The starting and stopping odometer with the total miles for each trip.
In addition, you must have a starting and ending mileage for the vehicle each year and break down the mileage by Business (support by the log) and personal mileage.
What If I get audited and don’t have a mileage log? Although the Internal Revenue Code mandates a written mileage log, the IRS is aware most taxpayers don’t maintain one. A recent IRS IDR (Information Document Request) actually addresses the issues by discussing reconstructing a mileage log. I find that many of the clients who walk into our Richardson TX office, do not have records to support their deduction and we need to spend some time reconstructing their mileage log.
Here are some ideas on how to recreate a mileage log -
- For beginning or ending mileage, either pull your service records near the date or pull a CarFax Report which tracks inspection and service updates on each vehicle, along with the mileage at those times. While you most likely won’t find the mileage on exactly January 1st, you can back into a date that is reasonable.
- Using your calendar for appointments, bills related to trips, etc.. rebuild a mileage log for business. Do you have any recurring appointments? You get the idea. While you may not remember every trip, you can reduce the damage.
- Make sure your mileage is in writing supporting the deduction.
- When going into the audit, over document. My experience is that this works to your benefit.
Moving forward, consider some of the APPs available. Some examples are MileIQ, Triplog, and Mileage Expense Log. Triplog is an Intuit approved APP used with QBO.
If you are audited by the IRS and have questions or need help, please feel free to contact me at (972) 821-1991 or email bob@jablonskyandassociates.com with any questions.
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