December 22, 2015
By Dan Gibson, CPA
I know it is tedious to do, but one of the most frequent hits on an IRS or state audit is the lack of documentation for auto mileage and expenses.
My experience has been that most companies are pretty good about it when it comes to the rank and file employees, but often fall short on owners and key employees.
During your year-end and planning discussions, I’d suggest looking at your current practices in this area and tighten them up for the upcoming year, if needed. In short, keep the following in mind:
For Mileage: The documentation needs to include the starting point, destination, total mileage and business purpose.
If the vehicle is owned or leased by the business, an odometer reading at the beginning and end of the year are required in order to document the personal use calculation.
For Travel, Lodging, Meals and Entertainment: Documentation needs to show a business purpose and the expense amount. For meals and entertainment, there is a requirement to specify who attended and what business matters were discussed. Keeping receipts, whenever possible, for all these expenses is a good practice as well.
If you are not using a log already, there are a number of searchable spreadsheets out there. They can be used as a computer worksheet; it’s also perfectly fine to print it so that it can be updated manually. The important thing is to use something to capture the required information.
For those who are comfortable using them, there are also apps out there that can assist in tracking mileage and expenses as well. Look around to see what works best for you and your company; here are a few links to get you started on your search: