As a small business owner, you definitely have too much going on at any time…whether it’s managing employees, keeping track of finances, addressing customer concerns, or looking for new business. One detail of running a small business that gets overlooked a lot of times is mileage tracking. We’ve talked to many small business owners that haven’t seen the importance of keeping accurate records for the business miles they drive…which leads to them missing out on valuable tax deductions and even opens the door for legal trouble. Let’s take a look at why mileage tracking is so important and an easy way you can integrate it into your daily routine.
The Basics
The federal government allows a certain amount to be written off as business expenses for each mile you drive a vehicle for business purposes. All they ask for in return is that you keep track of those miles…and really ALL miles you drive in that vehicle. Miles that can be included are trips to meetings, visiting clients, pickup and delivery, and work-related errands. “Personal” miles would include trips to eat with your family or personal errands like going to the grocery or drug store. “Commute” miles are those miles traveled from your home to work and do NOT count toward business miles.
Why Track?
It saves money. I shouldn’t really need to explain it further, but here goes…the IRS allows you to count as business expenses a total of 65.5 cents per mile for 2023. If you drive an average of just 1,000 miles for your business in the course of the year, that accounts for a $655 deduction from the business’s taxable income. We know people that drive more than 1,000 miles for business in a month! But since it’s a nice round number, we’ll say 12,000 miles in the year in business driving…which equals almost $8,000 in business expenses.
If you don’t keep accurate records, you won’t be able to prove that you drove those miles and won’t be able to get the largest deduction possible from your taxable income…which means you’ll spend more money than you need to.
Play it right and mileage tracking can help you improve business operations, too. If you’re keeping track of miles well, you will be able to see patterns where you (or your employees) spend too much time on the road. Use that to optimize your schedule, reduce windshield time, and improve efficiency and productivity!
Last, those mileage logs can help you stay out of legal trouble. If the IRS does come knocking for an audit, you will have to be able to produce accurate records of business-related driving…or pony up more money in the form of fines, penalties, and interest.
How Can I Track My Miles?
Back in the days before smartphones, the best way to track miles was the hard way…buy a mileage diary that you keep in your car…keep a pen with it because you’re going to need that pen every time you start up the vehicle. (Probably keep a backup pen or two in the car, as well, since you’ll be using those pens ALL THE TIME and they will run out of ink quickly.) Every time you put it in Drive…record the mileage. Every time you put it in Park…record the mileage. And make a note of what the miles were for. And get good at math so you can figure the elapsed miles between Drive and Park without busting out your calculator
These days there are dozens…maybe hundreds…of mileage-tracking apps available for iPhone or Android. You will probably have to pay about $30 per year as a subscription to use them. (Hey…another business expense!) If you’re a customer of SPB, you may already have an app in your arsenal that will do the job, though: QuickBooks Mobile.
(Speaking of QuickBooks, if you didn’t read our last blog about the future of QuickBooks and why you should be prepared to transition from Desktop to Online versions if you haven’t already…now would be a good time.)
Like many of the standalone mileage apps out there, QuickBooks Mobile uses your smartphone’s GPS to track where you are and how far you’re driving. Open the app, start driving, and the app will automatically track your mileage.
Get done with a trip, then QB Mobile allows you to categorize your trip and give specific notes about it. This will provide the accurate records the IRS wants to see, while also giving you a chance to more accurately see where you are spending your time, so you can think about how to change practices.
In addition to the mileage tracking, QB Mobile has helpful tools for tracking expenses and ways for employees to submit expense reports, including taking photos of receipts for easier record-keeping.
To top it all off, it integrates seamlessly with QuickBooks Online, so everything you enter into Mobile will sync to your accounting and record-keeping database, ensuring that everything is up-to-date.
Stay On Track
Whether you use QuickBooks Mobile or not, we highly recommend that you use some app to keep track of your mileage. There’s never a good time for small businesses to “give away” some of their money, but even if you are feeling charitable, you should probably choose who to give your money to rather than just handing over more of it to the IRS.
If you need help getting started with QuickBooks Online and Mobile, give us a call: 423-207-2497.