Sloppy Recordkeeping Dooms Deduction for Business Driving

Tax law requires certain substantiation when deducting the cost of driving a vehicle for business. In one recent case, a tax return preparer failed to demonstrate that her deduction for business car use was reliable. The court noted, “the likelihood that some indeterminate portion of [the taxpayer’s] reported vehicles costs was actually incurred for nonbusiness uses is exacerbated by the fact that her receipts show two or three same-day gas purchases on at least ten different days — days on which neither of the mileage logs shows an excessive number of miles driven.” The fact that she used an app—MileIQ—didn’t help because she didn’t provide all the information needed for substantiation; the app shows the date of mileage; it’s up to the user to say the purpose of each trip and note which trips are for business versus personal driving. Substantiation requirements are in IRS Publication 463. #IdeaoftheDay