If tax season has any silver linings, it’s claiming deductions for your business. If you and your employees travel at all for work, as nearly every business requires at some point, you have the opportunity to claim a deduction for business mileage. However, it’s not guaranteed. You can’t simply profess the number of business miles you’ve traveled – you have to prove it with a mileage expense log.
The IRS has clear guidelines about what it considers the wrong and correct ways to keep corroborating business records. This blog covers what you and your employees need to do to ensure you aren’t paying more than you need to this tax season.
When You Can’t Prove Mileage
Proper record keeping is common practice throughout most business processes, but keeping track of business mileage isn’t always a simple matter, especially if your business calls for frequent or lengthy trips. Every mile that isn’t accounted for now won’t be deductible later, though.
If you lack the appropriate records, you shouldn’t take the chance of claiming a deduction your business isn’t qualified for. If you choose to risk it and take a deduction you lack substantial records to prove, your business could be subject to fines and penalties for anything from substantial understatement, meaning you underpaid on your taxes, to filing an erroneous claim or filing a frivolous tax submission.
Always remember, you can be audited at any time, so you should always be prepared to show that all claims are legitimate, and to do that you must keep “timely and accurate records.”
Keeping “Timely and Accurate” Records
The first and most important thing employees and employers alike should do is keep all information in some kind of mileage expense log, diary, book, spreadsheet, manifesto, memoir, etc. Every trip requires four pieces of information to be considered substantially proven: the date or dates of travel, your starting point, your final destination and the business-related reason you are taking the trip.
It’s also important that this information is recorded at or near the time the business travel was taken. According to the IRS: “A timely kept record has more value than a statement prepared later when generally there is a lack of accurate recall.” Generally, retroactively constructed mileage logs are not considered a trustworthy record of deductible business miles. You must be able to show that you recorded the necessary information at the time of the trip which precise odometer readings, dates of travel and other detailed information about the trip will indicate.
Physical Mileage Expense Log Book
There is more than one way to gather and organize your information, though, some ways harder than others. If you choose to keep a physical mileage expense log book, be sure that employees have a clear understanding of what information is required of them and how they should present it.
If you’re writing down your trip data, employees can either record the starting and ending destinations and use a mapping system later to calculate mileage, or they can record their odometer readings at the beginning and end of the trip and do the simple math themselves. The latter method does lend itself to the greater possibility of inaccuracies, though.
Particularly for companies with large fleets of mobile employees, it’s helpful to create standard procedures for recording information and documenting it in expense reports, especially when each employee is keeping track of their own business mileage and submitting expense reimbursement requests. On the same note, if you have an approval process for reimbursements, this should also be documented to ensure you are reviewing all claims for accuracy and legitimacy.
Mileage Expense Tracking App
If manually keeping track of all of your trip information seems like tedious work and prone to error, there is technology out there prepared to help you. In these apps, such as CompanyMileage’s SureMobile, business travel can be tracked and organized for you, saving you the trouble. Depending on how the app works, it may use GPS tracking to track everywhere a vehicle goes while it’s running or it may calculate trips based on starting and ending points.
Using software takes the strain off of your administrators and managers to gather information during tax time. All business travel will be stored in a central location for easy retrieval later when you need it.
Reporting Travel Expenses
Employers don’t have to reimburse employees for business expenses, but many do. If you’re one of them, the way you handle the reimbursement depends on if you follow an accountable or nonaccountable plan. Simply put, reimbursements paid under an accountable plan aren’t counted as wages while reimbursements paid under a nonaccountable plan are treated as taxable wages.
Whether or not the employees of your company or organization keep a mileage expense log or something similar is a key factor in abiding by the rules of an accountable plan. Employees must be able to show that they “incurred deductible expenses while performing services” as part of their job, and they “must adequately account to…for these expenses within a reasonable period of time.” Both of these rules are easily followed with a mileage log or expense tracking app.
Make it Simple with SureMobile
Keeping a mileage expense log doesn’t need to be a time-consuming endeavor for your employees, your managers or your administrators. No matter how you choose to handle mileage expenses for your business – whether you reimburse at the standard mileage rate, use your own rate, or calculate actual expenses – the SureMobile app makes tracking business mileage a fast and straightforward process for everyone.
Instead of tracking every mile your employees travel, we calculate business mileage between the distance of two or more points of a trip. Our Quick Capture feature allows employees to check in at a location with the touch of a button. At the end of each workday, they simply take a couple of minutes to sort out and submit their trips, and our system handles the expense approval process. With an in-app address book, employees can quickly input which client or jobsite they’re visiting.
You already know you need to keep a mileage expense log if you want to claim your business mileage on your taxes. Why not make the process easy for everyone? Request a demo with CompanyMileage today, and learn about all the ways our software solution can save you not only time but money, too.