Whether you are a business owner or an independent contractor, you might need to track miles for taxes. When you file your tax return, all of your business-related mileage needs to be well-categorized according to what type of activity generated those miles. You need to record all of the information so that you can file your taxes more accurately. After all, you can get a significant tax deduction from that.
This article will give you detailed instructions on how to track mileage for taxes with the Shoeboxed app. This free mobile application allows you to instantly capture receipt images from anywhere and use your phone’s built-in GPS for easy, accurate mileage tracking.
1. What is a mileage-tracking app?
Before we kick off with the mileage-tracking app, we need to clarify what counts as business mileage. There seems to be a common misconception among self-employed workers when claiming mileage for taxes as to whether or not the commute from home to office or vice versa should be deducted as business mileage. A commute is not an activity that generates a revenue stream for your company. However, if your home is your primary place of business, then yes, mileage tracking should start from your home as the point of origin. Business mileage is applied for trips while doing business.
According to the IRS, business mileage is “the ordinary and necessary expenses of traveling away from home for your business, profession, or job.” This includes activities such as driving to clients for lunch or meetings, going to a conference, running errands (i.e: buying office supplies) related to your work, and more.
When you track your miles during business travel, your tax savings increase in sync with your odometer. It is sometimes impossible to keep quality records of all that travel consistently, accurately, and tidily (i.e. logbooks, gas receipts, parking stubs, etc.)
Luckily, a mileage tracking app is an easy answer for how to track mileage for taxes. It creates an automatic and contemporaneous mileage log for all of your trips. The mileage tracking app saves those records securely in the cloud-based system, so you never have to worry about losing them. Additionally, you can pull out or print out those records years later if you ever have to face an IRS audit.
Let’s take a closer look at the mileage tracking app to see why you need it, whether you are a freelancer or a small business owner.
2. Why do you need a mileage-tracking app?
- As a small business owner
Out-of-town business travel generates tons of receipts, from airline tickets, taxis, meals, laundry, accommodation, and more. Receipts verify what you purchased on the trip and act as a travel log of where time and money were spent on the business trip. Some important factors determining eligibility. For example: How much of the trip was personal, if the trip was away from your home, and if the amounts are justifiable.
Of course, business travelers can also make small mistakes, adding another reason for the IRS to audit with scrutiny. In this case, submitting receipts once you make the purchase will be a great idea. Don’t wait until the end of the trip to gather all your paper trail receipts! Shoeboxed can be a helpful assistant to do this and also eliminate the possibility of losing a receipt. You wouldn’t let a misplaced piece of paper allow you to lose reimbursement or deduction money, would you?
Another related issue that a small business owner will face when tracking mileage for taxes is the “mixed-use” asset. (For example, a vehicle is used for both personal and business purposes). The mixed-use asset requires extra care to distinguish when the vehicle is being used for business and when it is not. Since only the portion of use for business would be counted in the company’s book, keeping clear and detailed records of time, route, and reason it is used for business purposes help to establish what portion of use is business-related.
Shoeboxed tracks mileage using your phone’s built-in GPS when traveling to and from business meetings. The app will record the precise start and end location, as well as the date of your trip for detailed documentation.
- As a freelancer
As a freelancer, you are 100% in charge of your business. Therefore, organization and tracking become a top priority to successful freelancing.
Like any other good expense-tracking habit, tracking travel mileage ensures protection against tax audits and business disputes. Keeping track of your business mileage is important because it is tax-deductible. This means you can reduce your taxable income based on how much you drive for work. Various travel miles qualify, such as business travel to and from airports and hotels, errands and supply runs, travel to clients’ offices, and to and from business meetings. Don’t skip those valuable deductions!
One effective way to do this is to track your mileage and report those miles to the IRS. However, a freelancer’s line of work is usually busy and stressful since a lot can fall on your shoulders at once. Using a mileage tracking app can help take some of the pressure off. This app will consistently track your mileage so you can focus on more important aspects of running your business. You can rest easy, knowing that you are going to get the right amount of money back on your tax return. The mileage tracking app also alleviates the stress of an administrative task that requires hours working.
3. How to track mileage for taxes with the Shoeboxed app
As introduced above, Shoeboxed helps you track mileage using your phone’s built-in GPS for unmatched ease and accuracy. With the intuitive interface and features, everyone at all technology proficiency levels can start using Shoeboxed to track their mileage and other expenses.
Here is a step-by-step guide on how to track mileage for taxes with Shoeboxed:
- Step 2: Sign in or sign up to Shoeboxed Receipt & Mileage Tracker. You can sign in/sign up with your Facebook or Google account.
- Step 3: To start tracking, simply navigate to the “Trips” area of the app. Click the “Start Mileage Tracking” button to begin a new trip. Your location will be saved, and you can start driving.
- Step 4: When you reach your destination, click “Stop Trip”. The app will generate a trip summary, including the date, the ability to name the trip, editable mileage, and deductible rate information. It will even show you the route you took.
- Step 5: Once you’ve edited and approved the information, click “Done”. The trip info (along with the map) will be submitted to Shoeboxed as a receipt with an automatic category assignment for mileage.
But what if you have to stop on the way for business purposes, perhaps for a lunch meeting? No worries! You can still submit a receipt for your meal without interrupting your mileage trip.
You can create a mileage report or a combination report including mileage and any receipts incurred during this trip. After that, you can submit the report to your employer to be reimbursed. Alternatively, you can filter for all mileage during the tax year and make sure you get all of the deductions for which you qualify.
Still unsure what should be reimbursed and what should be deducted? Check our Tax Deductions Cheat Sheet to discover the most common deductions and how they can help you save on your taxes.
Now that you know how to track mileage for taxes with the Shoeboxed app. Let’s get ready to be a pro at tracking your business expenses!
Download (or update) the Shoeboxed Receipt and Mileage Tracker app for iOS or Android now to get the 30-day trial. Don’t forget to subscribe to the Shoeboxed blog for more engaging entrepreneurship stories, how to stay organized, DIY accounting, and the latest Shoeboxed news.