KEEPING A CONTEMPORANEOUS MILEAGE LOG

A recent post at the ROTH AND COMPANY TAX UPDATE BLOG written by Joe Kristan, a CPA who just happens to also be a 1040 expert (because of his individual training and experience – and not because he passed the CPA exam), provided some good advice for taxpayers who use their car for business - “If you are going to forge your travel calendar, at least get the year right”.

Joe opened the post by reminding us -

“The tax law has strict rules for supporting travel expenses.  You need to be able to document your travel with records showing the date, amounts, and business purpose.  For mileage, the tax law likes a contemporaneous diary.”

Joe’s post discussed a court case related to an IRS audit of the 2008 travel expenses of a Florida real estate agent.  It appears the taxpayer submitted a day planner as a “contemporaneous diary”.

“. . . the day planner included an order form which provided a convenient way for the owner to purchase a new day planner for the coming year. In this case, the order form was for the calendar year 2014, a fact that completely undermined Ms. [real estate agent]‘s testimony that she recorded information in the day planner contemporaneously in 2008.”

It should come as no surprise to anyone that there are taxpayers out there who do not keep a “contemporaneous” written travel log – and “recreate” a log if questioned by the IRS.  Over the years I have become aware of tax preparers who kept an inventory of blank past year diaries and pocket date books on hand for such a purpose.

Joe’s bottom line is wise -

“The moral: There are a lot of ways the IRS can trip you up if you try to cook up your mileage diary retroactively.  If you really want the deduction, record your travel as you go, either on an old-fashioned auto log or one of those smartphone mileage apps.”

It is not difficult, or even time-consuming, to actually keep a contemporaneous travel log.  I would not be surprised if taxpayers found that by keeping such a log they end up with more business miles than they would have estimated.

Below is what I advise in the “USING YOUR CAR FOR BUSINESS” section of my special report THE SCHEDULE C NOTEBOOK: 

“If you use your car for business you must keep ‘contemporaneous’ records of your business mileage. This means that you should record the information on the day the trip occurs.

Record each business trip separately.  Enter the date, location, business purpose and miles driven for each trip in some kind of diary, account book, or expense log.  If you do not have EZ Pass you should also note any toll expenses.  If you do have EZ Pass, you can identify the appropriate tolls on the monthly statement.  I also enter in my travel log the quarter I put in the parking meter while visiting a client – any expense for which I do not receive an actual paper receipt.

You should start off the year by entering the total miles on your car on the morning of January 1st in your log – and end the year by entering the speedometer reading after your last trip on December 31st. If you sell the car during the year, enter the total miles on the date of sale and enter the beginning mileage on your new car on the day you drive it off the lot. In addition to the business miles driven for the year you will also need to know the total miles driven for the year.”

I use a simple pocket date book to record my business trips and parking, tolls, and pay phone expenses.  In addition to tracking business miles you can use the book to track mileage, related parking and tolls, and local transportation costs for medical care.

I discuss an alternative method of tracking business miles – “sampling” – in my 2009 post “Bride of Keeping Track of Business Mileage”. 

TTFN