IRS Audits – Mileage Log Must Be Contemporaneous
I hope you have managed to stay safe and well! We focus on resolving tax issues in Prince William County and throughout the lower Northern Virginia area.
Here’s another case illustrating the importance of maintaining a contemporaneous mile-
age log book to claim a business deduction for the business use of a vehicle.
The IRS recently disallowed the mileage deductions of a Sch C consulting business
on the grounds that the taxpayer failed to substantiate the mileage under the strict substantiation rules of IRC section 274(d).
Under the substantiation requirements, no deduction is allowed unless the taxpayer
1) The amount of each expense,
2) The mileage for each business use of the vehicle and the total mileage for all use of the vehicle during the tax year,
3) The date of each business use of the vehicle, and
4) The purpose of each business use.
These elements must be substantiated using “adequate records” or “sufficient evidence
corroborating the taxpayer’s own statement.” [Reg. §1.274-5T(c)]
This is done generally by maintaining a contemporaneous log, trip sheet, or similar record, as well as any corroborating documentary evidence that together establish each required element of the expense. In the absence of adequate records, a taxpayer must establish each required element by “his own statement, whether written or oral, containing specific information in detail as to such element” and by “other corroborative evidence sufficient to establish such element.”
The court concluded that the taxpayer did not substantiate the car and truck expenses through adequate records. The taxpayer provided mileage logs indicating purported
dates of vehicle use, the purported origin and destination city, the mileage of each trip,
and calendars similarly indicating purported dates of vehicle use and the purported origin and destination city of each trip noted.
On brief, the taxpayer claimed that these materials were contemporaneously maintained
while the IRS argued otherwise. The court found the record ambiguous as to this question of fact. The taxpayer testified that he “kept a log and a calendar on a clipboard in the car.” The court noted the mileage logs appear to be printouts from a computer-generated spreadsheet rather than the original log referred to by the taxpayer and allegedly kept in the vehicle. Also noted was that no mention whatsoever of the business purpose of each trip nor the total mileage of all use of the vehicle during the tax year was found on the provided. The taxpayer’s generalized testimony was insufficient to otherwise establish any of the required elements under the substantiation rules.
If ever you’re feeling overburdened by your tax situation or you’d rather be doing something else with your time, just remember we’re here to help you with all of your tax preparation, resolution/representation needs. Now and in the future. Don’t put off addressing your tax situation. Feel free to contact us with any questions you may have in approaching your specific tax scenario.