Business Mileage Deduction – Write this down!

A recent Tax Court ruling saw a traveling salesman from Virginia disallowed a deduction for miles he had driven in the course of his work because he failed to properly document them (TC Memo 2016-111). Text from the Tax Court’s decision appears below, but the gist is that the IRS is serious in it’s requirement of a written log being kept to substantiate business miles. Logs should include — at a minimum — the following:

  • Date of the trip

  • Destination

  • Purpose of the trip

  • Exact mileage (not rounded)

It seems that in the current environment of revenue deficits, the IRS is beginning to crack down on business mileage. The opinion of the Court makes no indication of whether the defendant actually drove the miles he said he did, or if the miles were for a legitimate business purpose, but rather has disallowed the miles — valid or not — based on improper documentation. Regarding the mileage deduction, the Court is, in essence, saying, “If you don’t prove it, you lose it.”

From the Tax Court’s decision

“First, for some activities [the taxpayer] kept a log of the miles he drove for clients and would record them as daily entries after he returned to his office. Although the log reflects these as daily entries, a number of these entries for 2011 appear to be estimates and/or are missing information regarding the trip: February 1, 2, 5, 6; March 20, 21; April 5; all entries in May; June 23; July 12, 14, 21, 25; September 13 (second entry), 14, 16 (first entry); and October 18. Most of these entries fail to list the destination, listing instead a purpose or a business or an individual with whom [the taxpayer] met. The miles listed for some entries differ significantly from other entries for trips to the same location, with no explanation for the difference, and are rounded numbers. All of the entries listed for the month of May appear to be estimates. Finally, some entries report only the State to which [the taxpayer] drove.

The remaining daily entries list specific mileage (not rounded) and the purpose. The following entries fall into this category: January 4; February 10, 17; March 1, 17; April 6, 7, 20; June 1, 2, 6, 9, 15, 20, 21; July 6, 20, 22, 27, 28; August 7, 9, 12, 31; September 1, 13 (first entry), 16 (second entry); October 17, 24; November 1, 2, 7, 9, 14, 16; December 12, 19, 20. These entries reflect a total of 13,281 miles, 5,055 of which correspond to entries for travel before July 1, 2011, and 8,226 of which correspond to entries for travel on July 1, 2011, or later.”

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