Elizabeth City, NC CPA Firm | Auto Expenses Page | Mason L. Spruill, CPA
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When it comes to auto expense many taxpayers believe all they have to do is substantiate their expenses such as gas, maintenance, etc.  However, there is an additional step that is required.  You must document the mileage used for business purposes.
In a 2008 case (Niyitegyeka, T.C. Summ. 2008-129), the Tax Court agreed with the IRS that a taxpayer's auto expenses were correctly disallowed due to the lack of documentation to support the business use of the vehicle.
The regulations say "An account book, diary, log, statement of expense, trip sheet, or similar record must be prepared or maintained in such manner that each recording of an element of an expenditure or use is made at or near the time of the expenditure or use."  The record does not have to be prepared at the exact same time as the expense, but it does have to be made soon thereafter.  The regulations refer to a log on a weekly basis.
I think it is important to note that in this case it was not disputed that deductible travel did not happen, only that it was not documented.
The moral of this story is if you don't have documentation to support the business usage of the vehicle, the deduction the IRS may allow you could be - 0 -.  Ouch!
Please keep the appropriate documentation.

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