are full odometer readings necessary when recording mileage for business purposes? (for example: 54607 starting and 54637 ending).

a friend of mine told me that he doesn't record the exact odometer reading, but that he only records how many miles that he drove that day (for example: 50 miles). but he doesn't list the actual odometer readings.

what is the legal requirement for tax purposes? is he telling me the right thing? or are full odemeter readings necessary as opposed to just the trip meter?

I do not have a definitive answer, but unless he also has year beginning, ending and quarterly actual odometer readings, he just might have trouble substantiating his claims at an audit.

Back when I used an accountant, who was a small business tax expert, I was told to record the odometer reading, daily. I have a small notebook in the car. The end reading from the previous date is marked "end" so all I need to add is the purpose of the trip (errands, or Rockville Chipotle shop) and the ending odometer reading. By doing the math each day, your friend is actually complicating the who process, lol. Also, if I deviate substantially from a business route to do personal business, I note the deviation.

thank you so much.

No idea but I just do a draft email each day with starting mileage, each shop and then home again.

Now if I was really competent I would transfer that to a spreadsheet each night but apparently I like to do it in one lump for taxes.

I record my starting and ending mileage for the year on my spreadsheet. I then use the trip odometer to record my daily mileage for shops. The year end spreadsheet gives total miles traveled as well as miles traveled for shops.

[www.irs.gov]

This the IRS statement from their Publication 463 regarding mileage and record keeping. I have never found anything more specific on their website. They do show as Table 5-2 an example of a mileage log. At the bottom of the page is the disclaimer, "Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses." Table 5-3 actually has a statement, "THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM"

Important to note are the following statements: "You cannot deduct amounts that you approximate or estimate.

You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. You must generally prepare a written record for it to be considered adequate. This is because written evidence is more reliable than oral evidence alone. However, if you prepare a record on a computer, it is considered an adequate record."

I contemporaneously keep my records as miles per shop or miles per route of shops. This is noted on any shop paperwork I may have at hand in the vehicle and then is transferred to the spreadsheet when I am updating the spreadsheet after reporting the shop. I do not keep odometer readings beyond the ceremonial 'reading of the odometer on Jan 1'.

My understanding is also that you only need to do the Jan 1 reading. Then keep actual miles for each shop. Any time I do a larger route (more than 5 shops) I also print to pdf the Google Maps route of that day, that shows the miles, and it adds up to my miles in my Mystery Shopping Bible excel for the day.

I just declared the actual business miles (total) and the IRS accepted it and gave me my refund this morning.

I do record the yearly beginning/ending mileage because you are asked for that odometer reading on the tax form; however, I use MapQuest to lay out my shops. I do a roundtrip in MapQuest and that's my mileage. The IRS gets the better by my doing this because if I can't find a shop on the first try or have to go around the block a few times to figure out where my shops is, those extra miles are not recorded. I also may do a personal errand while I'm out so there's no struggle to try to figure out how much is personal and how much is business.

The other reason for keeping the yearly beginning/ending mileage is for possible insurance purposes.

I haven't weighed in on IRS questions before. However, having been "one of them" for nearly 30 years I believe I have some standing. IRS Code Section 162 allows for any and all "ordinary and necessary expense" to be deducted in any income producing business. How you go about "proving" that such an expense was incurred, and the correct amount to be deducted, can be the devil we call details. Personally. I use Google maps and plot out the most direct route for each route of shops. This method gives me a reasonable computation of my deductible vehicle expense and doesn't require getting bogged down in needless (my opinion) details. I have been audited every year since 1985 (occupational hazard) and only had to pay additional tax once and the amount was under $200 and was not caused by an overstated deduction, but a simple math error.

This fine print addendum states that this is a private citizen's personal opinion and in no way does it have the official endorsement on the IRS. However, I will rest comfortably tonight following my own advice. Thank you.

I claim actual mileage for business only. I do not count trips that are on my personal time. There is an option to do it either way. Odometer or actual mileage. Most tax programs will have you enter both and spit out what gives you the higher deduction. For me it is actual mileage and repairs.

Keep in mind that if you start your vehicle deduction, no matter what you choose, you will have to keep that way of doing it every year. The only way to change it is when you get another vehicle.

I am not a tax expert. This is just the way I do it. I can say I have been audited and the way that I do it has been accepted.

Actual expenses may make sense for folks who change cars frequently. But considering that my vehicle is a 1999 that still hums like a top with all those regular shop oil changes, actual expenses would certainly never work for me because the vehicle is pretty fully depreciated already. But if someone is considering actual expense they need to realize that reimbursed gas or oil changes from a shop can't also be claimed as a vehicle expense without 'double dipping'. So yes, every couple of years on my own dime I buy a couple of new tires and pay for a radiator flush or power steering flush, but those costs don't start to compare to the mileage deduction.

Kathee70 Wrote:
-------------------------------------------------------
>
> Keep in mind that if you start your vehicle
> deduction, no matter what you choose, you will
> have to keep that way of doing it every year. The
> only way to change it is when you get another
> vehicle.
>
> I am not a tax expert. This is just the way I do
> it. I can say I have been audited and the way that
> I do it has been accepted.


Kathee, it is not true that you can't change from standard mileage to actual expenses. You can. You can also change from actual expenses to standard mileage under certain circumstances. This is an oft-quoted myth (that you can't change) but it is not true.

The tax code is very complicated and changes with some regularity. Too many people lock onto what is generally true (once you pick a vehicle procedure you stick with it) and think that it is always true, and then pass that misinformation to others.

Everyone should either discuss their own tax situation with their own tax preparer or read the IRS guidelines and get their own education that way. But if you do not have any credentials as a tax preparer or tax expert of some sort, it would be better not to attempt to instruct others. It's not fair to the people who might follow your advice to their own detriment.

(I am an IRS Registered Tax Return Preparer. I've been a tax preparer for over 15 years and specialized in Taxation when I got my accounting degree.)

To answer OP's question -- no, you don't have to record the odometer reading coming and going every day. The reason for recording the reading at beginning and end of the year is to compute "total miles driven" so you can come up with a business use percentage after you add up all your business miles. Business/Total = Business percentage, which applies to the registration fees and the vehicle loan interest (and the actual expenses, if you are using that method). (You all do know that part of your loan interest is deductible, don't you?)

I keep my Mapquest printouts with my route shop documents and log my miles on my spreadsheet for each route. The IRS won't care about your odometer readings; they will want to know where you went, for what purpose, and how many miles you drove to get there, and the date. If you have those four components for each day or each shop (whatever works for you) then you should be fine.

I know I'm late to reply but having just gotten my taxes done this is what my accountant suggested. He suggested getting an oil change the first day of the year since the receipt will have the cars current mileage. Then when you go to file they use your current mileage and apply 70% of that for mileage reimbursement. Now if you have a car you use exclusively for mystery shopping then I assume you'd claim all the mileage. That saves you from having to track mileage on a daily basis.

Lelou,
Why apply 70 percent? You need to compute the actualy percent of your total annual miles that was for your business. So, you need to know how many business miles and how many total miles to compute a percentage if you are using actual costs. If you are using the IRS' per mile rate, it is that, times actual business miles that you can deduct.

In my case the car I'm using was not just used for mystery shopping. I did keep track of miles but not as accurately as I should have. The oil change mileage worked was a good solution for me for the first quarter of the year. Moving forward I do plan to more accurately track things, but I figured others might have had this issue of accurate tracking. I'd rather get 70% back then overestimate and be audited.

The map quest route sheet data is a good idea though. I so use that when planning my shopping for the day and I usually take a screen shot of it with my tablet to spare me unnecessary printing. I suppose I can just email that to myself at the end of the night.



Edited 1 time(s). Last edit at 04/11/2014 08:56PM by Lelou.

The question isn't about claiming "too much" and causing the audit; the issue is that if you get tagged for an audit, can you prove your business mileage? I've had clients claim vehicles with 100% business use (I usually put 98% to cover the occasional side trip to the grocery store they forgot about) and none of them have been audited.

If you've got the presence of mind to remember to get an oil change at the first of the year, why not save the $30 and just go write down your odometer reading or take a time-stamped picture of it if you think you need proof?

dspeaks is abolutely on message. Any WRITTEN contemporaneous record of mileage will be given great defference by IRS. That's been established policy for years. So why go to all of the trouble of an oil change? If an audit occurs, the IRS won't give much credence to "a conservative estimate," since their guidelines specify that "estimates" are not acceptable evidence for this purpose.

Time toup your record-keeping game now that you own your own business. Who know; something having nothing to do with your Schedule C might trigger an audit, but the whole return will then be scrutinized and one obvious deviaton will cause increased interest in ALL of your claims.

Late to this discussion, but since this issue is coming up for 2014/2015 I thought I'd respond.

The IRS requires TWO things to prove your mileage deduction or they will invalidate the deduction and levee huge fines: 1) A mileage log with start/end addresses, date, total miles and business purpose; and 2) Adequate Evidence.

The year beginning/end odometer readings from a third party are part of #2. Just jotting down your odometer by hand wont work. The auditor has no way to prove the reading is true. Getting your oil changed, keeping receipts from a business lunch or supply store... all those things help to prove your trips were driven and if they were for business.

The best way around this headache is just to get a GPS mileage tracker that will auto-generate your log for you. Since I always forget to log my trips, my tracker has been a lifesaver. I use the Mileage Ace, and it's worth it's weight in gold. My deduction is actually going up this year because I can prove more of my trips were for business.

On a side note, a buddy of mine was audited a few years back and it was horrible. He spent around 80+ hours having to recreate a mileage log, with every trip needing collaborating receipts and emails. Uhg. No thank you.

Why wouldn't hard copies of your shops and payment for those shops count as written proof? I have my starting and ending mileage for the entire year plus daily mileage written on the hard copy of each shop. Then I transfer those numbers into my Excel spreadsheet every few days so I don't fall too far behind. Everything is tallied up at the end of the year. And I give those numbers to my tax preparer. All my hard copies go into storage boxes. The storage boxes are labeled by month range and year. If the IRS wants proof, they will have boxes and boxes to sort through.

I enter the mileage I drove for each day of shopping on my spread sheet. The spreadsheet shows the date and the names and addresses of all my shops for that day. I also take beginning of year and end of year mileage figures. I am not saying this is the only way to do it.

Many of us have done the same thing for years without needing to invest in a $175 piece of equipment to track it for us.

I'm not sure how that GPS tracker would be more acceptable than all of the other things we have at our disposal. In addition to spreadsheets most MSCs have a list of our shops somewhere on the site along with the addresses and shop dates. To me it holds more weight considering the types of places we visit. So what if the GPS tracker is showing we visited a home improvement store, a bank, the mall, a gas station and a new car dealer? Alone it doesn't prove we were any of those places on business.



Edited 1 time(s). Last edit at 12/05/2014 02:12AM by LisaSTL.

The IRS requires a contemporaneous record of business mileage. I update my Excel spreadsheet at the end of every day. That is definitely contemporaneous. I record the odometer reading on New Year's morning. Today I got my oil change (mystery shop) so I have a third party record of my odometer reading in early December. In my opinion this is slightly redundant, since my state inspection certficate from the garage lists the odometer reading as of November 26th. When Costco checks my tires and rotates them, they record the mileage. Another 3rd party record. 30 years ago, I used to keep a paper log book in my glove compartment. I could have written anything in it, but it satisfied the IRS (I got audited and they did accept it). I may end up eating my words someday, but I think that all of my electronic records these days provides much better documentation. I see no need for a paper log book or for a GPS tracker, which (as has been pointed out) would not document why I went somewhere anyway.

The IRS has rules and regulations, but if you get audited their interpretation is somewhat up to the Field Agent. Be a jerk or tick them off, and the documentation standards just may go up!

Dealing with an IRS agent at an audit is a lot like dealing with the police. They are just doing their jobs. I had one audit where I had to account for about $50 in cash. I had receipts for everything from the three or four trips except for my fast food meals [I would hit a drive through and eat while driving]. I showed the other receipts, showed the agent the distance involved on a map, and she accepted that the money in question was indeed for my meals on the road. I'm sure that if I'd gone in with an attitude of "I'm right and you're wrong" that there would have been an entirely different outcome.

I have always understood that the issue will only come up if you are audited. The majority of us are not audited, especially if we are honest and do not do anything suspicious to trigger an audit. That said, I keep a record of each shop and the miles driven and also have oil change mileage and car repair visits with mileage on the receipt during the year. So I have mileage amts to refer to scattered throughout the year. If I get audited I can go back through my list of shops and know what day I did them and where I went. If I needed to I could certainly print out a mapquest for each of them. Of course this would take time but it would also take time on a daily basis to write down odometer readings and print out maps etc. I think the risk might be worth it if you are someone who has not gotten audited in the past.
I do not shop full time so this would be a bigger headache for someone who does thousands of shops if an audit comes up and perhaps full time shoppers are at a bigger risk for getting audited, but for those of us who are part time and have other income to pay taxes on the risk might be worth it.

Court rulings have long required that the IRS give "great defference" to written, contemporaneous, records of mileage. That has been interpreted to mean that if the tax payer has such records it is up to the IRS to prove that they are incorrect, not up to the tax payer to prove that they are correct. It is not necessary for some thrid party to read the audometer for your records to be accepted! However, if you keep the receipts for your oil changes (always a good idea for other reasons) those will bolster the written record, since they will show some markers within the tax year that comport with your mileage record.

In regards to the post recommending the GPS tracker we need to keep a couple of things in mind. Although it does not include a link, the recommendation was made by a member who registered, made this single post and signed out all within 17 minutes. There are no links to pertinent IRS regulations. Not once are the words "shopper" or "shopping" used. The post also refers to business lunches. How many of us attend business lunches with any regularity? Instead it would be lunch shops. Just sayin'.

LisaSTL - very interesting observation. Maybe he that poster was a shill trying to get us to buy the GPS tracker? Maybe a PM would be in order?

Most spam type posts do include a link so it may or may not be legitimate. Only time will tell.