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 (Reuters) - More than 40 million Americans earn money while driving
around in their cars, making them eligible for a valuable business
mileage deduction from the Internal Revenue Service.
At 56 cents a mile, less than two business miles equals a dollar. So
for someone driving 25,000 business miles a year, $14,000 in
deductions is at stake.
Keeping an accurate mileage log used to be an arduous task involving
a notepad and paper, but most people do not bother with the work.
Many recreate their trips after the fact. Some just make it up. Do
it wrong and you could get an audit.
"Getting a lot of round numbers means people either aren't tracking
or are rounding," says P.J. Wallin, 33, a certified public account
from Richmond, Virginia.
Bill Nemeth, an enrolled agent who represents clients in IRS audits,
says most of his clients tend to exaggerate their business mileage
and, when audited, it can be challenge to try to prove they actually
drove the miles. Nemeth says he even uses Carfax reports from cars
that clients have sold in order to document the actual mileage of
the vehicles. In more than 25 years of doing taxes, Nemeth can
recall only one client who presented a log that was clearly used
daily.
MileIQ, which sells a GPS device that helps track mileage, surveyed
about 1,000 of its users and found that only 36 percent of them had
kept a written log previously. Another 18 percent admitted to making
up numbers after the fact, 15 percent said they did nothing with
their mileage, and 11 percent said they used their calendars to go
back and recreate driving distances.
But in today's highly automated world, apps and standalone GPS
devices take the work out of the process, so there are no more
excuses. Prices and functions vary, and some personal preference is
involved.
Here are three different approaches - all of which are
tax-deductible as a work expense.
MileIQ (https://www.mileiq.com/)
This iPhone app (scheduled to be out soon for Androids) promises to
be more automated than its cousins - always running in the
background. It costs $5.99 a month or $59.99 a year. Lighter
drivers, however, can use it for free. Users can log 40 drives a
month before they would have to take a paid subscription, so you can
take it for a test drive.
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The idea is that the app does most of the work, although eventually
users have to look over the results and eliminate listings that were
not for business. Data from the app is regularly uploaded to the
cloud, and reports sent automatically via email. Users can also
customize the data.
MileIQ co-founder Charles Dietrich says the app actually learns from
patterns and increasingly knows when a trip is of the reimbursable
sort and when it is not.
Easy Mile Log (http://www.easymilelog.com/)
This device, which costs $149, is a small GPS tracking device you
leave in your car. When you start a drive, press a button to note
the trip is either work or personal. It will document the date and
time of your travels, where you started, where you went and the
distance. You can dump the data from the device onto your computer
using a USB cord.
EasyBiz Mileage Tracker (http://www.easybizmileage.com/)
At $2.99, EasyBiz Mileage Tracker is a cheaper app option, but not
quite as automated as the others. Instead, it relies on the user to
create what is basically a computer-assisted mileage log - starting
and stopping each trip, while it notes the location and the distance
via GPS.
Mileage Tracker allows users to customize report printing and add
other entries - like tolls, for instance - that could come in handy
when doing mileage reports.
(Editing by Beth Pinsker, Lauren Young and Matthew Lewis; Follow us
@ReutersMoney or at http://www.reuters.com/finance/personal-finance)
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