By Keith O. Frame, CPA
You may not have heard this in the mainstream media, but the IRS is hammering business owners and independent business people in Tax Court regarding documentation necessary to claim tax deductions for business use of an automobile.
There have been several recent cases that make it clear the IRS is serious about targeting this issue. For many years, the law has been clear in that documentation required must include some sort of contemporaneous record regarding the time, place, purpose, mileage and other costs associated with business travel. This type of documentation, could, in some cases, be created after the fact based on other records which might have recorded the same or similar activity in a different fashion or for a different purpose. A calendar with miles written on it without other information to give the mileage context is inadequate.
My own experience over the years tells me this is a ripe area to audit. Few people keep the records they are required to keep. If you drive a vehicle for business purposes and claim mileage deductions, it is imperative that you address your record-keeping requirements. The loss of a mileage deduction on the Schedule C of a self-employed person could be a very costly mistake.
IRS Publication 463 provides the information you need to adequately document expenses. If you need assistance understanding the requirements or devising a record-keeping system, please contact our office.