Often in an IRS audit, the examiner will request your mileage log at the start of the audit. If you do not have a mileage log, then you are at risk of losing more than just vehicle deductions. Let’s consider what they will think it.
If you don’t have a log for mileage, the IRS examiner may think about your other records. Pondering on that thought, the examiner may also think you are a mischievous taxpayer with mischievous tax records who needs extra scrutiny.
The IRS says that you may keep an adequate record for part of a tax year and use that part-year record to substantiate your vehicle’s business use for the entire year.
To use a sample record, you need to prove that your sample is representative of your use for the year.
By using your appointment book as the basis for your mileage, you not only build great business-use proof, but you also do a great job of showing that your sample vehicle record mirrors your general appointments during the year.
(If you are using a mileage app, synchronize the app results with the appointment book.)
The IRS illustrates two possible sampling methods:
The three consecutive months log requires only one start and one stop, and you are rewarded with nine months of mileage-log freedom.
This makes the three-month log the grander alternative. After your three months you have basically formed a habit and may find it easier to continue all year vs starting back up the first three months of the following year.
IRS description of the three-month test:
According to this IRS regulation, this three-month sample is adequate to prove 75 percent business use
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Spencer Accounting Group, LLC does not provide investment, tax, legal, or retirement advice or recommendations in these blogs. The information presented here is not specific to any individual's personal circumstances.
Keana Spencer is an Accountant, Entrepreneur, and Educator to her clients, with a strong passion. Keana has over 10 years of experience and through her practice, she is a source of knowledge and strategies to her clients.