Donna Genie explains why the IRS requires contemporaneous mileage logs for business vehicle deductions. A Tax Court case disallowed deductions when a taxpayer reconstructed mileage after the fact. She recommends MileIQ to automatically track trips and notes the 2022 rate was 62.5 cents per mile.
62.5 cents per mile
2015 and 2016
$59 per year (current at time of recording)
We always talk about mileage reimbursement when it comes to capturing automobile expenses. If your vehicle is not owned by the business, you'll want to make sure that you are capturing your mileage expense each and every day. When you make business trips, keep in mind that business trips can be running out to get supplies, going to the bank to make deposits, anything related to your business, even going out to meals or a meeting with someone regarding your business, or investigating another business that's like yours. All of that mileage can be captured and you write it off based on the standard mileage allowance that the IRS sets each year for the second half of 2022. That mileage rate is 62 and a half cents a mile. So that adds up. Two miles is more than a dollar. For every hundred dollars in mileage you have, you're probably going to save 25 to $40 in taxes. So don't miss out on this opportunity. Now, one of the fine points is that people try to go back and create a mileage log at the end of the year. I want to update you on a recent tax court case that's going to prove why you need to be keeping up with these records all throughout the year. We use a software, an app called Mileiq. It is awesome. I've been using it for years. You put it on your phone and it will, in the background, track all of your mileage for you and allow you to swipe one way if it's personal and another way if it's business. And be able to really document this a whole lot easier than the old days of keeping a notepad and some paper and trying to backdate it. And we used to have people try to do this in their calendar. This recent court case will prove to you why you cannot use a calendar. I'm going to refer and put the link to this court case down below because I know you all love to read Tax Court, but there's a gentleman. His last name I'm going to try to pronounce it's E Z E. I'm going to call him Easy. I don't know if that's exactly how his name is pronounced in his native language, but he was from the US Filed a tax return as a construction company. Now, EZ didn't really have a whole lot going on in his favor because he was really tracking a lot of expenses and very little income, trying to write off a big amount. So this was probably one of those cases where he was going too far and the tax court was going to get him one way or the other. What they caught him on was mileage. He went back, apparently, and I think this was probably after the fact, when he was questioned on his mileage and created a mileage log in his calendar, he went backwards and did this, gave it to the auditor. The auditor said no. Now, why did the auditor say no? Aren't those valid records? Well, here's what the court case came back and said that the IRS disallowed for lack of substantiation the deductions for all car and truck expenses for both years he was under audit for 20, 15 and 16. The reason was it was not contemporaneously recorded. That sounds like a lovely big word. Contemporaneously in this case means you have to record it as you do it, all throughout the year. You can't just go back and recreate later on. So the tax court disallowed all of his deductions for vehicle expenses in this business, said that adequate records generally requires the taxpayer to maintain an account book, diary, log statement of expense, trip sheets, or similar prepared contemporaneously with the use of the vehicle as evidence of documenting his expenses. So don't rely on an old piece of paper or say, well, if I ever get audited, I could create a log and back into all this. Don't do that. It's not worth your time. Grab Mileiq in the App Store and put that on your phone today. It runs $59 a year currently. My goodness, that'll save you. You probably have a couple thousand dollars worth of tax deductions alone. More than pays for itself. And also, I'm gonna put you a special link down here below. You can use a promo code. Because we are a professional who's been recommending that software for years, we'll get you 20% off. So do yourself a favor. Get your Mileiq. Get a mileage app tracker. There are a couple others if you prefer those. That's okay. Mileiq's got a great reputation and I highly recommend them. So check that out. Make sure you protect yourself and get every dollar out of that tax bill that you can in savings for recording your mileage accurately. Please follow us on Facebook and Instagram. Please make sure to check out our blog and our website linked below. Subscribe to our YouTube channel and hit the bell to be notified when we post. You can email me at donna at campgroundaccounting. Com.
