Is there an app for that? How an app can take the stress out of documenting vehicle expenses.
Our clients generally have well organized records and are able to get them to us in a timely manner. However, there is one area that we have seen many of our clients who are self-employed or who hold jobs require them to be constantly on the go, struggle with. This area often times bottlenecks the tax return process: vehicle expenses, specifically mileage.
Vehicle expenses are a popular write-off especially for the self-employed, but clients are rarely able to provide the documentation and records needed to receive this write off. Why is this the case? The amount of information you are required to compile to receive this write-off can often times be overwhelming and may not seem necessary or worth it to many clients. However because of the dramatic drop in gas prices over the past year, writing mileage off has proven to be of greater benefit than actual vehicle expenses. However, according to the IRS, in order for this write off to apply you must record the mileage for each business trip, along with the date, destination, the names and relationships of the business parties, in addition to the business purpose of the travel. Keeping detailed records of each business trip can be a pain in the neck! Some well-meaning tax payers start off the year with detailed records, but slowly those records dwindle or become nonexistent, leaving them with very little to write off. When a client finds themselves in this position they often ask if we can just come up with a number and use that, and sometimes they provide us with a large rounded number for us to utilize in their tax return. It is important to note, that because this is so common among tax payers, it is one of the most highly audited area and the IRS will deny the deduction entirely if you are unable to substantiate your claim.
Due to the increased need to keep accurate and detailed records for business travel, there are now apps for this. I am sure most of us aren’t surprised, there are apps for just about everything now.
There are several companies that you can look to for applications to assist you and your company in tracking and recording the mileage as you travel. One that has received quite a bit of praise for its ease of use is the app MileIQ. This app uses “automatic drive detection” to measure mileage and is able to record each of the necessary requirements for notation and whether your travel is for business or personal reasons. Another app that is out on the market is one by Intuit, this QuickBooks app could help simplify your write off process as it allows you to track additional business expenses while you are on the go. So tracking your expenses for coffee and lunch with a client just got much easier. The cost of these apps is very reasonable and they could end up saving you a substantial sum on your tax return.
Another option to consider, might be the Automatic car adapter. This device plugs directly into your car’s OBD (onboard diagnostic) system. Not only does it track your mileage, but it provides you with an assortment of additional car and driving related information. Some have even said it has helped them improve their driving skills.
At the end of the day, any tools that can help to accurately document and track your tax write offs can save you time, a headache and insure you are receiving your full tax benefits on your tax return. And when you win, we win!
Having the needed documents and records to substantiate your write off make the tax process smoother and much less stressful for client and tax accountant alike.
If you have a favorite app that has helped you to gain greater control over your finances, we would love to hear about it. Additionally, if you have any questions regarding tax documentation, or if you feel you would benefit from scheduling a tax planning meeting, please contact us. We would be happy to assist.