A common question amongst people seems to be, “How do I go about paying less taxes?” As a CPA, I have never heard someone ask, “How can I pay more taxes?” If you are a small business owner, particularly one that files a Form Schedule C with their tax return, I will be discussing a quick and easy way to increase your business expenses just by keeping more detailed records.

One of the lower hanging fruits for small business owners is business mileage. On the flip side, one of the lower hanging fruits for an IRS auditor, when performing an audit on a small business owner, is also mileage. How does the mileage deduction work? As a business owner, you are entitled to a deduction of $.535 per business mile driven. This rate changes annually. The 2018 mileage rate has not been announced. What is a business mile? The IRS defines a business mile as the miles driven in your car between two business locations, your office to a customer for example.

With proper record keeping, this is a valuable available deduction. Every year at tax update trainings there is a tax court case where a taxpayer lost their deduction for mileage due to poor record keeping. So how do you avoid losing your deduction? Keep proper records. Proper records would include a day planner with meetings that correspond to the miles you drove or an Outlook calendar that corresponds to the miles. In addition to tracking your meetings, you will need to track the miles driven to and from. This can become cumbersome if you are driving every day for your business or have multiple meetings in a day.

I personally have not tried any of these out, but there are apps out there for your smartphone that can track your mileage and allow you to label your trips. On top of that, they can also export to CSV which can be converted into Excel for ease of tax preparation. If an app is not your cup of tea, there are Excel templates that can be printed for manual record keeping.

All in all, tracking your business mileage is an easy way to increase your business deductions. It works out to a little over one dollar for every two miles driven. If you have any questions about tracking mileage or need help getting started, reach out to me today to schedule a meeting to get moving.

Fitzpatrick, Johnson & Associates CPAs, is a full service accounting firm providing tax, financial statement, and bookkeeping services based in McMinnville, OR, southwest of Portland, OR.