Each week, our resident small business tax expert, Stephen Fishman, answers your small business tax questions.
Question: I receive a flat-rate auto allowance (untaxed) monthly from my employer as I am in a sales rep position that requires knocking on doors and visiting client facilities. This is my first year in this new position. I want to make sure I am appropriately taking the right actions to make sure I am compliant with my deductions and have a smooth tax season when filing next year. On the MileIQ website, I read that the “The IRS also wants to know the total number of miles you drove during the year for business, commuting, and personal driving other than commuting.” So do I need to track and report location and purpose of EVERY mile I put on my car? (not just for work, but also personal use of my vehicle?) I understand having to log and report the drives used for business, but it seems a bit overwhelming, cumbersome and almost invasive to list every single place I go and why in my personal life. I don’t mind investing in MileIQ, but want to make sure I’m making well informed decisions!
-Tim in Milford, MA
Stephen Fishman: If you’re an employee and want to deduct unreimbursed business expenses, such as mileage, you must file IRS Form 2106, Employee Business Expenses with your return. You must list in this form (1) the total miles you drove the vehicle during the year, (2) your “average daily round-trip commuting distance,” and (3) the “other” (personal) miles you drove the vehicle. If you’re self-employed, you need to provide the same information on Schedule C, Profit or Loss From Business.
The IRS certainly won’t complain if you keep track of every mile you drive; and, in fact, this is easy to do now using apps like MileIQ. If you don’t choose to use an app like MileIQ, here’s what you need to do:
- Make a note of your car’s odometer reading on January 1 and December 31 of each year. This way you’ll know the total miles you drove the car during the year.
- Keep a detailed mileage log of your business trips during the year.
- If you commute from home to work, figure out how many miles you drive each way. You’ll need to know how many days you drove to work during the year and multiply that number by your daily commuting mileage. The result will be your annual commuting mileage.
- At the end of the year add your total business and commuting miles together and subtract that number from the total annual miles that you got from your odometer readings. The result will be your total annual “other” personal miles.
While this method is very manual and can be time consuming, it will satisfy IRS requirements – as long as you remember to keep a detailed mileage log of your business trips and accurately calculate your commuting miles.
Question: I am a home health care RN. I start from home four days a week. I go to the office only 1 time per week for meetings. Can I claim miles for commute to first patient visit? Or my commute home from my last visit?
-Lee in Blacklick, OH
Stephen Fishman: Unfortunately, the answer is “no.” Commuting from home to your work location and from work back to your home is never deductible. Since you visit various patients in their homes four days per week, you have no regular work location during those days. The IRS says that if you have no regular work location, the location of your first business contact inside your metropolitan area is considered your work location for these purposes. Thus, you can’t deduct the cost of driving from home to your first patient of the day. Nor can you deduct the cost of driving back home after you see your last patient of the say. You can deduct driving from one patient to another during the day. Also, you can deduct the cost of driving from home to visit a patient outside your metropolitan area and back home. Your “metropolitan area” includes the area within the city limits and the suburbs that are considered part of that metropolitan area.
