Adequate recordkeeping is necessary to prove business expenses in the event of an audit. This pertains to all business expenses, but it has been an ongoing problem in the area of business use of vehicles. Not only do you need to have adequate recordkeeping for automobiles, trucks, and SUVs, but you also need to have the same type of recordkeeping for other vehicles that you might use in your business.

It is not enough to estimate a percentage of business use or to say that a particular vehicle is used 100% for business. You must be able to prove the business use, and to do this, you must have adequate recordkeeping in conjunction with documentary evidence. Adequate recordkeeping means keeping the written proof you need in a diary, statement of expense, or similar record along with documentary evidence that will support each element of the expense. Documentary evidence can be a receipt, a bill with a canceled check, etc. It must show the amount, date, place, and basic reason for the expense.

Written proof must be recorded in a timely fashion in an account book, diary, statement of expense or computer generated log. A “timely fashion” is considered to be at or near the time of the expense.

In general, not only should you have the date you started using a vehicle in your business, but you must have the original cost of the vehicle, any improvements made, the mileage for each business use, and the total miles for the year. For all business use, you should have, at the minimum, a written record of the date of each use, the mileage for the use, the business destination, and the business purpose for the use.

Proper recordkeeping is crucial in the event of an IRS challenge. Without the proper documentation, your business use of vehicle may be disallowed.

If you would like more information about Pennsylvania Elder Law, Business Law or Tax Law, please contact an experienced Pennsylvania Attorney who is also a Certified Public Accountant (CPA) via email or phone us at (724) 216.6551 at our Greensburg, Pennsylvania office.

The Iezzi Law Office serves clients in southwestern Pennsylvania, including Greensburg, Pittsburgh, Delmont, Monroeville, Murrysville, Latrobe, Irwin, Uniontown, Connellsville, Indiana, Somerset, and other towns located in Westmoreland County, Allegheny County, Fayette County, Indiana County, and Somerset County.

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To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.