Finance & Real Estate

Why Mileage Is Deducted

In order to ensure that all employees are only claiming business-related expenses, most employers require their staff to keep detailed records. In addition, many companies monitor employee spending and may even require them to get pre-approval before making any purchases. There are several reasons why an employer requires the tracking of miles driven for business purposes and why the IRS permits this type of deduction. This article explains why you may be asked to track your mileage when traveling for work and how it may impact your taxes.

What Is Considered Business Travel?

To begin, it’s important to understand what is considered business travel. This includes any time you drive a car for work purposes. As long as the journey is related to your job, it may be claimed as a deduction. While many employees are under the assumption they must use public transportation while working out of town, this is not true. If you drive to a company-related event, you may deduct the cost and mileage of your trip. For example, if you drive to a conference in a city two hours away, you may deduct the cost of gas, car repairs, and your mileage rate. If you drive to a conference in a city two hours away, you may deduct the cost of gas, car repairs, and your mileage rate.

Why Is Mileage Deducted?

As mentioned above, employees are required to keep detailed records of business-related expenses. This ensures that employees are only claiming those costs that are related to their job. The IRS allows employees to have mileage deduction rules. However, the IRS does not allow employees to deduct the cost of travel to and from job-related events.

Taxes on Mileage for Business Travel

Companies track employee expenses and tax deductions for a variety of reasons. First, this helps ensure that employees are only claiming those costs that are related to business. Furthermore, keeping track of employee expenses and deductions may assist with payroll tax calculations. This information is then reported to the government and used to determine how much an employer must withhold in taxes from each employee.

More importantly, it’s important to remember that the IRS closely scrutinizes all deductions, including those related to business travel. In fact, the IRS has auditors that routinely review employee expenses and may request additional documentation. If an auditor determines that a business deduction was improperly claimed, they will send you a letter that explains the changes they are making to your taxes. While this may be frustrating, it’s important to stay calm and respond to the auditor’s request. Failing to do so could result in serious penalties and result in the required taxes being increased.

Conclusion

Driving for work is something almost all employees will experience. Fortunately, the IRS allows employees to deduct the cost of their business-related driving. Keep in mind that the IRS only allows employees to deduct the cost of driving to and from work, as well as the cost of driving to and from job-related events. Additionally, employers may require employees to track their mileage for tax purposes. This ensures that only legitimate business expenses are claimed and that an employer will have the documentation to support employee deductions.