Your Mileage Log — Start It Now (2014 Version)

I’m going to start the new year with a few reposts of essential information. Yes, you do need to keep a mileage log:

Today is the first business day of the new year. You may have resolved to keep good records this year (at least, we hope you have). Start with keeping an accurate, contemporaneous written mileage log.

Why, you ask? Because if you want to deduct all of your business mileage, you must do this! IRS regulations and Tax Court rulings require this. Written is defined as ink, so that means you need a paper log.

The first step is to go out to your car, and note the starting mileage for the new year. So go out to your car, and jot down that number (mine was 40,315). That should be the first entry in your mileage log. I use a small memo book for my mileage log; it conveniently fits in the center console of my car.

Here’s the other things you should do:

On the cover of your log, write “2014 Mileage Log for [Your Name].”

Each time you drive for business, note the date, the starting and ending mileage, where you went, and the business purpose. Let’s say you drive to meet a new client, and meet him at his business. The entry might look like:

1/2 40315-40350 Office-Acme Products-Office, 1234 Main St, Las Vegas
Discuss requirements for preparing tax return, year-end journal entries

It takes just a few seconds to do this after each trip, and with the standard mileage rate being $0.56/mile, the 35 miles in this hypothetical trip would be worth a deduction of $20. That deduction does add up.

Some gotchas and questions:
1. Why not use a smartphone app? Actually, you can but the current regulations require you to also keep a written mileage log. You can transfer your computer app nightly to paper, and that way you can have the best of both worlds. Unfortunately, current regulations do not guarantee that a phone app will be accepted by the IRS in an audit.

2. I have a second car that I use just for my business. I don’t need a mileage log. Wrong. First, IRS regulations require documentation for your business miles; an auditor will not accept that 100% of the mileage is for business–you must prove it. Second, there will always be non-business miles. When you drive your car in for service, that’s not business miles; when you fill it up with gasoline, that’s not necessarily business miles. I’ve represented taxpayers in examinations without a written mileage log; trust me, it goes far, far easier when you have one.

3. Why do I need to record the starting miles for the year?
There are two reasons. First, the IRS requires you to note the total miles driven for the year. The easiest way is to note the mileage at the beginning of the year. Second, if you want to deduct your mileage using actual expenses (rather than the standard mileage deduction), the calculation involves taking a ratio of business miles to actual miles.

So start that mileage log today. And yes, your trip to the office supply store to buy a small memo pad is business miles that can be deducted.

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6 Responses to “Your Mileage Log — Start It Now (2014 Version)”

  1. Edna Voegele says:

    If your phone app creates a log that can be printed or exported to excel and then printed, is this acceptable? And would this have to be done everyday or can it be printed at the end of the year to keep in your records along with your tax return?

    • Russ says:

      No one knows how the IRS will rule with regard to phone apps; the regulations on mileage logs were written before the Internet (and smartphones, of course). I’d want to be able to show it was contemporaneous; monthly printouts should be sufficient.

  2. [...] Fox, Your Mileage Log — Start It Now (2014 Version).  You would not believe how much it helps in an IRS exam.  And doing it retrospectively when the [...]

  3. Anthony says:

    Start with keeping an accurate, contemporaneous written mileage log.

    Why, you ask? Because if you want to deduct all of your business mileage, you must do this! IRS regulations and Tax Court rulings require this.

    “A contemporaneous log is not required” Treasury Regulations 1.274-5T(c)(1). What is required is that “a taxpayer must substantiate each element of an expenditure or use (described in paragraph (b) of this section) by adequate records or by sufficient evidence corroborating his own statement”. A contemporaneous log is by far the easiest way to accomplish this, but when push comes to shove the IRS will accept a log which is constructed from sufficent evidence. How difficult it is to come up with such sufficient evidence depends on the travel patterns of the taxpayer. In the case of a taxpayer who was required to travel from town to town, staying a few days to a couple weeks at each location, and had hotel receipts at each location I was able to construct a log from those hotel receipts along with google maps lookups. This was deemed to be sufficient evidence in an audit. In the case of someone who travels to different locations every day and doesn’t keep any records of what those locations are, it is often impossible to construct a log after the fact. In this case you’re at the mercy of the auditor, who may allow estimates or may not, and if not you’re probably not going to win this on appeal.

  4. Anthony says:

    When you drive your car in for service, that’s not business miles

    When helping clients reconstruct mileage logs I’ve always asserted that service miles are business miles to the extent that all the other miles are business miles. So if the miles other than service miles are 64% business, then 64% of the miles for service are business. If they’re 100% business, then 100%. I’ve never had an auditor disallow this.

    That said, you do indeed have to have a mileage log even if the vehicle is 100% business, at least, with one important exception – a qualified nonpersonal use vehicle. This don’t come up often, but they do come up.

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