Taxes are an integral part of the business. In simple terms, taxes are a mandatory payment that is made to the government. When a business is engaged in the driving business, it needs to keep a track of miles that are covered by its commercial vehicles during the business or working hours. Irrespective of the size of the business, i.e, small scale or large scale, it needs to record and track the miles covered by the vehicle.Read More
From the taxation perspective, tracking miles is important. The chief objective behind this is tax savings. The business already spends a lot of money on its functioning and other things, but apart from that taxes are also compulsory to pay. Hence, a rational taxpayer is the one that pays the optimum amount of tax. The optimum here refers to neither less nor more. Thus, one can say that tracking miles for tax purposes are obligatory. Here are some of the tips that will help your business to track the business mileage for taxation grounds.
Mileage rollback refers to the mileage deduction. Before tracking the miles and mileage, it is obligatory for the business to qualify for the mileage deduction. Once the business qualifies, then only it can aim for fuel economy. For qualifying for the tax deduction, the vehicle of the taxpayer must be used for only business purposes. It means that the vehicle must travel from office to work site and if there is any other business place, then it can travel there.
There are two methods by which the business can claim the deduction:
- The standard deduction method
- By using the actual expense method
Mileage Calculation Method
As mentioned in the above point, there are two methods by which one can lay claim to the deduction. These methods are standard deduction and the actual expense method.
In case, if you adopt the standard mileage deduction method, then, in that case, you have to maintain a proper track and record of the vehicle. It means that you have to record each time when the vehicle is driven for work and work-related goals. Supposing that, if you adopt the other method, i.e, the actual expense method, then, you have to maintain a proper record of all the expenses that are related to the work. All the receipts must be saved that are related to the expenses that are incurred by the vehicle during the driving work.
Keep An Account Of The Odometer
An odometer is a tool that is used to calculate and measure the distance that is traveled by a specific vehicle. For keeping an exact and correct record, it is advised to record the odometer at the beginning of the year. By doing so, you will be presented with the correct and accurate figures. As per the IRS, i.e, International Revenue Service, a taxpayer must have a complete and full record of the miles that are traveled and covered by a specific vehicle. In case, if a new vehicle is purchased, then the odometer must be recorded from the day when it was first deployed on the business.
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If Required, Then Maintain A Driving Record
Just in case, if your business adopts the standard mileage deduction method for the tax payment, then it is necessary for the business to keep and maintain a full record of the miles that are traveled by the vehicle for business purposes. For this objective, one can follow the following two tips:
- As soon as the vehicle is about to start a trip or about to cover the distance, the odometer must be recorded. All of the necessary information such as the starting point, distance covered, ending location, and the date of the journey must be recorded.
- Once the trip comes to conclusion, the same information must be recorded once again. This will give an insight into the business trips as well as the complete information will also be provided.
In the event, if the business adopts the other method, i.e, the actual expense deduction method, then the business must keep a complete record of the receipts of expenses. In this method, the business does not require to maintain a mileage record. In this expense, receipts are recorded. Complete documentation must be done. The document must include information such as date, description of the products purchased, and other things are mentioned.
These receipts play a major role when the business maintains the actual expense deduction method. Thus, these were maintained in an effective as well as efficient manner.
Tax Return And The Mileage
While filing for the tax return in Form 2106, you are required to fill in the miles that are traveled by the vehicle during a particular year. For calculating this amount, a standard mileage rate is used.
In this case, if you are using the actual expense deduction method, then rather than the miles, the receipts are used. Therefore, all of the receipts must be maintained in an accurate manner. In addition to this, the receipts must be well organized in the groups, like, gasoline, repairs, vehicle rentals, etc. In the nutshell, by following the above-mentioned tips, one can record and keep a complete track of the miles that are covered by its vehicles. The taxation process will be simplified by following the tips.