When calculating your business mileage deduction, you need to keep track of the number of miles you drive each month and the rate you deduct them. The standard mileage rate is higher than the actual expenses. Tracking your mileage can help you find the correct method. If you track business mileage daily, you can determine whether the standard mileage rate is beneficial.
Contemporaneous Mileage Tracking Is The Best Practice
Keeping track of business mileage can be a difficult task, and it is easy to get caught up in the day-to-day operations of your business. Fortunately, you can use a sampling method to determine the best way to track your mileage. A sample period is defined as at least 90 days, but it can be as short as a week per month. This method is effective because it enables you to compare your mileage data against similar companies to determine the most efficient way to spend your time and effort.
Traditional mileage-tracking methods have many drawbacks, and they often create loopholes and redundant administrative tasks. Many organizations have been slow to implement modern mileage-tracking software and systems because employees aren’t comfortable being monitored or feeling “Big Brother” watching them. Unfortunately, sticking to old methods and processes can result in higher costs and less productivity. Fortunately, many organizations are beginning to realize the benefits of implementing such systems.
IRS Designates The Employer As Custodian Of The Record
The IRS requires employers to keep a record of the mileage of their employees’ business mileage. While it may seem like a minor detail, this is critical to avoid a lawsuit. The company’s mileage log must meet IRS guidelines and be compliant with current technology. Paper mileage logs are a traditional option, where employees record their dates, business purposes, origin and destination, and odometer readings. Employers should keep these records for a minimum of five years.
Although some employers offer company cars to their employees, most employers reimburse employees for business mileage driven in their vehicles. The IRS’s rates are reasonable, but proper recordkeeping is key to maximizing your tax benefits. IRS mileage rates can be complicated, but adequate recordkeeping can ensure a smooth tax return. Keep these four guidelines in mind to maximize your mileage reimbursement.
Commuting Miles Aren’t Eligible For The Mileage Deduction
Many companies reimburse their employees for their mileage. However, this practice isn’t tax-deductible unless the miles are used to commute to and from work. The IRS has a rule about what qualifies as commuting, so commuting mileage is generally not tax-deductible. Therefore, regardless of whether a driver uses a car for business or pleasure, they must record their mileage logs. If the IRS is not satisfied with the mileage log, it can reject the claim.
Many employees may feel that their commute is too long or too far to qualify for the mileage deduction. Luckily, the IRS has issued guidelines for determining if commuting expenses are tax-deductible. While the distance from your home to your workplace will affect which job you choose, you can usually count the miles as business expenses. The standard mileage rate is $.02 per mile, but you can deduct dash cams, food delivery holders, and tolls. However, you can deduct tolls and parking fees separately if you drive for business. Lastly, you can enter your car expenses as personal expenses in your accounting software.
Using A Mileage Tracking App
The benefits of a business mileage tracking app are numerous. These programs are highly user-friendly and eliminate much of the hassle of mileage logging. Instead of spending hours calculating mileage and guessing if you’ve made enough miles to meet your target, you can now use a business mileage tracking app. By operating a business mileage tracking app, you can spend more time helping customers and not calculating miles.
One of the best mileage tracking apps offers GPS tracking, as well as automatic mileage tracking. Once you set up an account, you can easily track business and personal mileage, generating itemized tax deductions. In addition, you can categorize trips with the app, which will make it easier to reconcile expenses.