Auto Expense Proof: Best Way To Deal With An Audit

Each year the fear of an IRS audit will be in the minds of most taxpayers. One item that the IRS auditor will always require back up for, is auto expenses. The IRS will require auto expense proof when they audit any returns that claim a deduction for car or truck expenses. There are many tax court cases denying a deduction for auto expenses because the taxpayer could not provide adequate proof, even though it was obvious that they had to drive many miles to conduct business…

If the deductions that you have claimed for car and truck expenses is very high then this may make the Internal Revenue Service suspicious of whether or not you have actually incurred that amount. If you want a good experienced representative to get you out of a tight spot, call 713-774-4467 and see how we can help you.

Mileage Log For Auto Expense Proof

Maintaining a mileage log is important documentation toward proving auto expenses. Keep all the receipts for maintenance and repairs, parking and tolls, and insurance. Keeping this log is the best method to keep track of expenditures, and even though keeping it is not required by law, it is considered “adequate records” to prove the business usage of your vehicles.

When maintaining your mileage log, it is important that you write down the mileage that was used for business purposes, on an almost daily basis. You should also write down the date and the time. Write down where you were traveling, and the business purpose of the travel.

The IRS approves four methods to track business miles. If you are not using the “mileage method” receipts are needed for all expenses greater than $75.

1. “Brute Force.” Record every business mile for the year. Then compute your business use percentage. Required for use of more than one vehicle for business during the year.

2. “90 Days.” Record your business miles for a “typical” 90-day period. Use that business use percentage as if it existed for the year.

3. “First Week.” Record business miles for the first week of each month and use that to calculate the business use percentage for the entire year.

4. “Simplified.” Record the starting and ending mileage for a 90-day period. Record your personal and commuting miles for the 90 days and assume the remainder are the business. Then treat as if that percentage was for the whole year.

Some of the reasons why the IRS may ask you for car or truck expense audit proof are:

• There is very little profit from your business.
• Excessive use of automobiles for business use.
• High expenditures were incurred on automobiles.

Is it worth the time and expense necessary to keep adequate records to prove auto expenses?

Yes, it is very important to try to keep daily records retain your vehicle expense deduction. I’m reminded of a picture on the wall in my dentist’s office. A child ask’s his mom if he really has to brush all his teeth each day. The mother replies, “Only the one’s you want to keep”. Only maintain detailed records of the deductions you want to keep during and audit of your auto expenses. Of course, if you haven’t you can always call us now at 713-774-4467, and we will help bail you out.

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