When you use your own vehicle for work, it is key to document the below:
Date: This is kind of self-explanatory. All dates included must fall within the current financial year for which you are declaring your taxes. Purpose of your trip: Your trip must have a business purpose. It can be a commute to a second office premises, other than your normal one. Trips for work-related seminars, errands, to visit/service clients, to restaurants for entertaining customers can be considered.
Location: Mention the address to and from so you can justify the distance claimed
Other Expenses: Add parking/toll costs if you use the standard fixed rate.
Trip Notes: Include notes about the visit written at the time of trip e.g. who you met, what was the outcome; anything that might be of use to you in an IRS audit situation.
Apart from this the form must have your odometer numbers from the start and end of the financial year. If you are looking for a mileage form, ensure it incorporates all the above fields in a format that is workable for you.
Who needs to maintain this form?
Everyone use who uses their own vehicle for business purposes would ideally use this form. This is especially true for the self-employed who are often short-staffed and may not be perfect at maintaining records.
The IRS pays a lot of attention to your tax returns if you fall in this category. And the self-employed may find themselves more likely to be audited. One of the things they are likely to check is if you have claimed automobile miles as business related expenditure when this was not actually the case.
So, it is best to keep detailed records of vehicle usage for your company and maintain it for up to 3 years after you’ve filed your tax returns.
Standard Mileage Rate vs. Actual Expenses Methods
You are allowed to choose either of these methods while claiming deductions for business miles.
Standard Mileage Rate allows you to multiply the business miles you have clocked with the IRS mileage rate published every year and use this amount as a tax deductible. This rate takes into account your depreciation, maintenance and other factors. Hence you cannot claim, say, registration fees or fuel cost separately as a tax deductible. You can claim parking fees and tolls, though.
Actual Expenses method where you have to keep a record and maintain receipts of fuel, oil, repairs, insurance, any rental fee, depreciation etc. You will still need to keep a track record of how many miles you’ve travelled this year and how many of them are business-related. If this comes out to say 70%, then you would claim 70% of your total expenses for your vehicle that year as a tax deductible. If you only use your vehicle for business purposes during work hours, when you’re looking for a mileage form, an app feature that automatically classifies mileage during those hours as business and others as non-business automatically could make your life easier.
Resource Box: If you are looking for a mileage app, the author of this article suggests Milecatcher.Com.
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