Mileage logs – a small business owner’s best friend!
Mileage logs – a small business owner’s best friend!
As a general rule, most tax deductions allow you to receive a “dollar for dollar” exchange. In other words, if you spend a dollar on an item, you get to deduct one dollar on your tax return. Vehicle mileage is an exception to this rule. As a small business owner you have the choice of deducting the greater of actual money spent operating your vehicle, or the IRS allowable rate ($.51 for 2011) for every business mile driven. For most vehicles the small business owner will come out way ahead by deducting the $.51 per mile. This means that you may actually get a tax deduction that’s better than a dollar for every dollar you spent.
Now, before you get too excited, the IRS is wise to this, and mileage is one of the areas where the IRS is most likely to audit you. Your defense for this type of audit is going to be a contemporaneous mileage log. Contemporaneous means that you keep notes everyday as events are occurring, instead of trying to go back at the end of the year and figure out how many miles you think you drove.
The ideal mileage log will have the following pieces of information for every single trip:
1. Reason for the business trip
2. Odometer reading at the beginning of the trip
3. Odometer reading at the end of the trip
4. The date (activity log)
Many small business owners are guilty of making these numbers up as they go along and the IRS knows this. By keeping a contemporaneous mileage log you are insured that you maximize your tax deduction and if the IRS ever wishes to audit you, you will be prepared to prove that you are entitled to the money.
For more information about tax consulting and tax solutions for business owners, check out our website at www.assurancetaxadvisors.com
As a general rule, most tax deductions allow you to receive a “dollar for dollar” exchange. In other words, if you spend a dollar on an item, you get to deduct one dollar on your tax return. Vehicle mileage is an exception to this rule. As a small business owner you have the choice of deducting the greater of actual money spent operating your vehicle, or the IRS allowable rate ($.51 for 2011) for every business mile driven. For most vehicles the small business owner will come out way ahead by deducting the $.51 per mile. This means that you may actually get a tax deduction that’s better than a dollar for every dollar you spent.
Now, before you get too excited, the IRS is wise to this, and mileage is one of the areas where the IRS is most likely to audit you. Your defense for this type of audit is going to be a contemporaneous mileage log. Contemporaneous means that you keep notes everyday as events are occurring, instead of trying to go back at the end of the year and figure out how many miles you think you drove.
The ideal mileage log will have the following pieces of information for every single trip:
1. Reason for the business trip
2. Odometer reading at the beginning of the trip
3. Odometer reading at the end of the trip
4. The date (activity log)
Many small business owners are guilty of making these numbers up as they go along and the IRS knows this. By keeping a contemporaneous mileage log you are insured that you maximize your tax deduction and if the IRS ever wishes to audit you, you will be prepared to prove that you are entitled to the money.
For more information about tax consulting and tax solutions for business owners, check out our website at www.assurancetaxadvisors.com
