AED Newsletter Header - Jan13
Get in Gear on Auto Mileage Documentation

Taking a deduction for the business use of a personal automobile can add up to significant tax savings. But you should be aware that the IRS is strictly enforcing the rules that require meticulous documentation of both the mileage and the purpose of the trip. Auto mileage expenses cannot be estimated, but must be accurate, recorded, and verifiable.

 

A recent string of tax court rulings in favor of the IRS serve to underscore the importance of proper documentation. An example is the recent tax court case of DAVID H. GARZA, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, which demonstrates how even a taxpayer who made an effort to comply was denied a deduction.

 

"Nevertheless, while we believe that petitioner had business travel expenses in relation to his employment, the Court must heed the strict substantiation requirements of section 274(d). See, e.g., DeLima v. Commissioner, at *16 (finding with no doubt that the taxpayer used a vehicle for business purposes, yet having no choice but to deny the vehicle expense deduction because she failed to follow the requirements of section 274(d) and its related regulations). Petitioner's calendar planner, while contemporaneous, is not reliable substantiation for the claimed expenses because petitioner failed to meet the criteria set out in section 1.274-5T(b)(6), Temporary Income Tax Regs., supra. Petitioner did not record the amount, the time, or the business purpose of each business use of his truck [*7] because, in his words, "it was just too much to do. Accordingly, his deduction must be disallowed."

 

Just meaning well is not enough. It is clear that, unless you meet all of the documentation requirements, the IRS is in a strong position to challenge and deny the mileage deduction on your tax return.

 

Need help in determining the best way to record your business miles, time, and purpose? Please feel to contact us if you have any question on this or any other tax issue.

We go beyond the numbers by delivering insight, guidance and success to our clients.

 

Gray, Gray & Gray, LLP
781.407.0300

www.gggcpas.com


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