Business Vehicle Mileage & Expenses

Reporting vehicle mileage and related expenses has been a tax return requirement since 1985, and without it the tax return is incomplete. Thus, mileage and relaxed expenses must be supported with adequate written records, in the same manner that income and other deductible expenses are.

Our advice to our clients is, if you want the automobile mileage and related expense deduction allowed in an IRS audit, record this information as it occurs, on a contemporaneous basis. In prior years, we sent auto logs with this reminder letter, however, "...times, they are a'changing..." and there are now many apps available for smartphones, iPads, tablets, etc. that can do this job much more effectively and efficiently than the old auto logs.

The rules for record keeping have not been relaxed. Auto logs, diaries, or other similar written records are still required to prove the business use of automobiles or the deductibility of travel. The tax rules for meals and entertainment have changed - see New & Views year-end report. The five W's (who, what, where, when, and why) still satisfy the IRS best.

The law requires that business vehicle information be maintained in writing. The IRS regulations require that taxpayers:

1. ". . . substantiate each element of an expenditure or use . . . by adequate records or by sufficient evidence;
2. . . . adequate records are satisfied if the employee (taxpayer) maintains account books, diaries, or expense reports prepared at or near the time of use;
3. . . . must establish the amount of each expenditure and its business purpose . . ."

Our experience with the IRS has indicated that IRS auditors are generally satisfied if a written record is produced; without the record, the deduction is usually disallowed. A recent tax court case that involved a CPA, spotlighted the importance that these records be adequate and contemporaneous. After being sent a notice of audit for his personal tax return, the CPA proceeded, several years after the fact, to try to recreate from MapQuest the records required to substantiate his auto related expenses. Due to the significant time difference between the expenses being incurred and the records being created (printed dates on MapQuest pages), the Court disallowed all his auto related expenses. They did not meet the requirement for adequate, contemporaneous records - deduction not allowed!

For 2021, the business standard mileage rate is 56 cents per mile, for 2020 it was 57.5 cents per mile; medical and moving related mileage will be 16 cents per mile; mileage for charity will remain at 14 cents per mile.

Click here for the Vehicle Information Summary Form for reporting your mileage for your tax return.

If you would like to receive an "old style" Auto Log Book or if you have any questions, please call 856-829-9100.