Wednesday, June 8, 2011

Mileage deductions:Stay on track to keep the IRS off your back, Part 2

1. When you own a business, you should ask yourself, “Do I owe anyone money, and why?”

If you do owe someone money, it might actually be “yourself” for out of pocket expenses relating to the business activity.

2. Unless an employee turned in a mileage log with totals, would you pay them for the mileage? The answer is most certainly no.

So why would small business owners think they are owed money from their business for mileage driven if they did not turn in the mileage logs to the business?

These basic concepts are the crux of the mileage reimbursement argument. From the IRS’s perspective: Why should I give a business a deduction for something unless there is a basis for the expense?

Small business owners should also recognize that keeping a mileage log may actually be less intrusive than trying to keep track of actual expenses relating to business travel, especially if they do not have a separate vehicle used only for business activity during the year.

That is why as a business owner, keeping a mileage log is one of the most important things that your tax professional should be talking to you about. If they are not, then maybe it is time to talk to someone else.

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