What is a Mileage Log?

Fleet management comes with a lot of paperwork—CDL licenses, training, inspections, hours of service (HOS), mileage, etc. All of this paperwork is required for compliance with regulations. However, tracking certain numbers, such as mileage, is more beneficial to your fleet than it is for any reporting agency. Your mileage does matter, in regards to calculating your CSA score, but it also matters when filing taxes and calculating tax deductions. Every business seeks opportunities for deductions. For fleets, one of the easiest deductions is mileage. To make sure you’re reporting mileage correctly your drivers should keep a mileage log. Below is everything you need to know about keeping a mileage log.

What is a Mileage Log?

A mileage log is a meticulous record of the mileage driven in each vehicle, which sounds simple enough. However, many fleet companies feel it’s adequate to record mileage every week or month, but these records would not suffice for an IRS audit. The IRS needs a clear view of your operating expenses, including mileage. To do that, you need to record mileage for every single trip. This may sound tedious, but the right tools, such as a telematics system, can help by automatically recording this data and storing it in a centralized database.

IRS Mileage Tracking Requirements

There are very few requirements for mileage tracking by the IRS for tax purposes. The priority in mileage logging is that you log the mileage of each trip, for each vehicle. The IRS does have eligibility requirements for claiming mileage such as the type of business. You also cannot claim mileage incurred during personal use of the vehicle. This can be confusing for fleet drivers that take their vehicles home each day. You have to differentiate between the miles they put on the vehicle for work and commuting miles.

Along with mileage you should also record:

• Date of the trip
• Trip mileage
• Business purpose
• Locations you drive to and from

It can be difficult to record all of this for each trip, especially for fleets. Mileage logging apps or certain fleet management software makes this task much easier.

Why Do You Need to Track Mileage?

Many businesses simply estimate the mileage they use for their business. This works well enough for many, but it opens companies up to a greater risk if they’re audited by the IRS. In the case of an audit, you need to have detailed records of your mileage. There are even lawsuits in which the taxpayer lost years of deductions due to improper record keeping of mileage (Royster vs. Commissioner).

While it may not seem likely that you’ll face an audit, know that it is possible and you may face deduction losses. Sole proprietors face a higher risk of audit due to a lack of separation between personal miles and business miles. It is one of the most commonly scrutinized deductions for businesses, and it’s better to be prepared than not.

Mileage Deductions

There are two types of deductions relating to mileage tracking: standard or actual expense deductions. The standard deduction is determined by the IRS, which was 58 cents per mile in 2019. The actual is input by the taxpayer. This would include detailed information about mileage, expenses, and records to support both.

Standard deduction

As mentioned, the standard deduction is a preset deduction. When you use this deduction, you don’t get the option to deduct other expenses such as repairs, depreciation, and registration fees. This is generally a good option for individuals that travel for business in their personal vehicles, such as Uber drivers. But for large fleets, or for fleets that don’t use their vehicles for other purposes, they may not get their full deduction from this option.

Actual expense deduction

The actual expense deduction allows you to calculate in your mileage, lease payments, fuel, registration fees, depreciation, maintenance, and more into your tax filings. With this method, you would calculate the total vehicle expenses and multiple it by the miles driven for business to find your total deduction.

What Happens if You Don’t Keep a Mileage Log?

Surprisingly, this is a common occurrence, especially among those new to using their vehicle for business. New fleets aren’t always accustomed to tracking mileage like expert drivers would be. Taking the standard deduction in these instances is generally advised. With the standard deduction, you can estimate your mileage out of your total vehicle costs.

It’s a different story for fleets with vehicles they use only for business purposes. If you didn’t log your mileage, consider taking the standard deduction and making estimates with what little evidence you have. Here are the steps you can take:

• Start with the mileage logs you do have
• Calculate total mileage based on receipts at the beginning and end of the year
• Consider driving habits. If you use the same routes several times a year, estimating your mileage may be simpler.

For the future, you should use a mileage tracking app, GPS tracking device that logs Hours of Service (HOS), or a total fleet management system. A full system will not only log your HOS, but it will also log and optimize other parts of your business and store this data in a centralized database. This makes it easier to recall the data you need, when you need it.

How to Log Mileage for Taxes

An IRS audit is something that no business wants to encounter, and if your business lacks the proper documentation, you may lose years of deductions. So, while there are few actual rules about logging your mileage, there are still guidelines you should follow. To keep a mileage log book with the proper information, you need to be as strict with your recordkeeping as the IRS would be in an audit.

To reap the full benefits of an IRS mileage deductible, your records must have the following information:

• Date of trip
• Starting location
• Destination
• Trip purpose
• Starting mileage
• Ending mileage for each trip
• Tolls and trip-related expenses

Many fleets like to store this information in a notebook to update by hand, or utilize an Excel spreadsheet. Options like these were the norm before the integration of fleet management software. No matter how you record this information, it’s vital that you do so for each trip and that the records are as detailed as possible. You must also keep these records for at least three years. Here’s what you need to do to accurately report your mileage to the IRS:

Determine Calculation Method

First you need to decide which calculation method you’re going to use. If you’re taking the standard deduction, then your recordkeeping doesn’t have to be as meticulous because it’s a preset deduction. Though we’d caution against being too lax with reporting because an audit could still occur with the standard deduction.

Record

At the start of the year, take odometer readings for all of your vehicles. You will need the total miles driven on your Form 2106. You should also maintain a vehicle mileage log with all of the aforementioned information. You can do this with paper or Excel sheets, but the most efficient and accurate way to do this is to use a telematics device.

Keep Receipts

In addition to details on trips and mileage, you should also store any receipts that you incur throughout your trip. You can also keep receipts for maintenance and equipment. It can be difficult to ensure you always get every receipt from your drivers and staff. However, there are solutions to this issue. A comprehensive fleet management software solution will include features such as fuel card integration. This would eliminate the need to keep all fuel receipts from each trip and vehicle since you’d be able to see these records on demand. This software stores these details in a centralized database for easy analysis and recall—vital during inspections. You should also sign up for automatic notifications and receipts wherever possible to further simplify your recordkeeping. If this isn’t possible, and you receive paper receipts, consider scanning them to a dedicated file on a central server or cloud storage.

Document Retention

You must retain your documents for at least three years in the case of an audit. It doesn’t matter how you store this data. However, if you have a large fleet and have difficulty staying organized and up to date, then telematics may be your best option. Telematics systems document mileage automatically and use cloud-based technology that can be accessed from anywhere. It can also log receipts, fuel stop locations and costs, maintenance receipts and costs, and so much more.

Fleet management software helps you stay up to date with all of your fleet’s movements. This smart software can store data for years to be used for analytics, predictive maintenance, and cost management. But fleet management software can do so much more than this. It also provides route optimization and planning, maintenance scheduling and alerts, driver behavior monitoring, engine diagnostics monitoring, and idling and utilization reporting.

Learn more about what fleet management software can do for your fleet, at Azuga.

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