Millan + Co.
Manually tracking mileage and reimbursement based mileage can be tedious, but with the right tools and knowledge, you can automate and simplify the process by utilizing smartphone apps while also maximizing tax deductions under Schedule C of the U.S. tax code.
This article takes a quick look at Schedule C advantages and offers a list of six smartphone automated mileage tracking apps and features that offer convenient and efficient IRS-compliant solutions.
Schedule C, also known as IRS Form 1040, is the section of the U.S. tax code used by sole proprietors, freelancers, and small business owners to report their business income and expenses. One crucial deduction allowed by the IRS is the mileage deduction, which lets you deduct the business-related mileage driven during the tax quarter or tax year.
Schedule C mileage deductions are more advantageous than taking a standard deduction for self-employed individuals because they allow you to deduct the actual expenses associated with using your vehicle for business purposes. This method allows the deduction of total costs, including: gas, lease payments, maintenance, insurance, depreciation and toll fees. Qualified expenses are eligible if you drive for business, or medical purposes, work for a charitable organization or move as an active-duty military member.
On the other hand, the standard deduction is a fixed amount set yearly by the IRS that you can claim regardless of your actual expenses. If your eligible expenses are higher than the standard deduction, you could save more on taxes by using the Schedule C mileage deductions. However, it's essential to keep detailed records to support your mileage claims.
Automatically tracking mileage brings several advantages, including:
Accuracy: Automatic tracking reduces the risk of human error compared to manual record-keeping.
Time Savings: Eliminating the need for manual tracking saves valuable time for entrepreneurs and busy professionals.
Tax Compliance: Accurate mileage records ensure you claim the rightful deductions while complying with IRS guidelines.
Cost Savings: Maximizing mileage deductions can lead to significant cost savings on your tax bill.
MileIQ is a popular app that uses GPS technology to automatically log your trips. It distinguishes between personal and business trips and provides detailed reports for easy tax filing.
Everlance offers seamless mileage tracking along with additional features like expense tracking and receipt scanning, making it a comprehensive tool for freelancers and small business owners.
TripLog uses advanced tracking algorithms to automatically record mileage, and it allows for easy customization of trip classifications and expense categories. It offers reimbursement features for companies and employees.
QuickBooks Self-Employed: This app is an excellent choice for those who use QuickBooks for accounting. It automatically syncs mileage data with your financial records, streamlining the tax preparation process.
Stride Tax is designed specifically for gig workers and independent contractors, offering mileage tracking, expense management, and tax support.
Hurdlr provides real-time tracking of mileage, expenses, and income, giving users a holistic view of their business finances in one place.
When choosing a mileage tracking app, keep an eye out for these essential features:
Automatic Tracking: Ensure the app automatically detects and logs trips without requiring manual input.
GPS Accuracy: Look for apps that use reliable GPS technology to accurately record your mileage.
Trip Classification: The app should distinguish between personal and business trips to provide accurate records for tax purposes.
Expense Integration: Consider apps that offer integration with expense tracking and accounting software for better financial management.
User-Friendly Interface: An intuitive interface makes it easier to navigate the app and access your mileage data effortlessly.
Data Export: The ability to export mileage reports in various formats can be valuable for tax preparation and record-keeping.
With the abundance of smartphone apps and features available today, tracking your mileage has never been more efficient. Choose the app that best suits your needs and take the first step towards optimizing your tax deductions while ensuring tax compliance.
While these apps streamline the mileage tracking process, it's always essential to keep accurate records and consult with a tax professional if needed to ensure you claim the correct deductions.
Have a question regarding the finer points of optimizing your actual deductions under Schedule C? Millan and Company is here to help and can provide peace of mind with a comprehensive review and recommendation for your annual tax filing.
