In the recent past, business owners used paper logs to track their mileage. Most people have now turned to technology for their mileage tracking purposes. The apps they utilize include milelQ, triplog and trackmydrive which are all available for Android and IOS. The apps have made it easier to record every mile you drive.
Each time you drive, such tracking apps classify the trip as either personal, taxfyle.com/small-
Here are the main reasons why you should track your mileage:
- Minimize tax burden
Reducing your tax liability has to be one of the most important reasons to track mileage. Taxes and mileage go hand in hand, but in order to claim other vehicle expenses, you need to consistently track your mileage in order to authenticate your claim. This can only be achieved by using an automated mileage log for tax reimbursement or deductions. Internal revenue service (IRS) must verify your claims before allowing any deductions. And this can only be achieved when you make trip records with any other evidence that your trip was business related. Mileage logging will help you capture some business trips that can be less obvious such as a stop, on your way home, at the post office to mail a business letter. Over time, such small entries add up to acceptable deductible miles, in turn, putting back your money in your hands when being taxed.
- Audit protection
Every business owner is required to report their business expenses and earnings and file taxes to the IRS each year. It is also obvious that as a business owner you are always looking for ways to earn more money by not only thinking about your revenue but also the pay you take home. To further maximize your deductions you need to pay attention to your mileage. The IRS is aware of the costs associated with using your vehicle to carry out business and therefore allows you to claim any expenses to help reduce your taxable income. It examines every mileage you claim as expense deductions. Providing factual evidence to prove that miles listed for business reasons were driven for the same reason will help you win your case.
- Comparing revenue earned with expenses incurred
For any business owner, it is important that you determine how your business income compares to expenses. Money spent on gas, insurance, and other vehicle expenses can be counted as part of your business costs. By tracking your expenses lay a foundation for solid record keeping allowing you to monitor your business growth, prepare financial statements as well as tax returns. Apart from that, having efficient knowledge of your business in terms of how your money is spent helps you confirm whether or not your business is working as per the budget.