For field organizations, it is common that reps traveling from account to account use their own vehicles. That means each tax season field reps may be eligible to deduct the business mileage they acquired using the IRS Employee Business Expenses form 2106. Here’s three things all field reps looking into mileage tax deductions need to know:
1. The IRS Rate
Each year, the IRS publishes a standard rate which employees can use for mileage deduction. For tax year 2014, the rate is 56 cents per mile, and will rise to 57.5 cents per mile in 2015. Some field organizations reimburse their reps according to the IRS rate, but reps should remember that that rate is a suggestion, not a requirement for employers. If an employer does reimburse at the IRS rate, reps will not be able to deduct mileage on their personal taxes. However, if an employer does not reimburse at all or reimburses at a lower rate than the IRS a field rep is eligible for the deduction. In the case of partial reimbursement, a rep can deduct the difference. For example, if the employer reimburses 30 cents per mile, a rep can deduct 26 cents per mile.
2. Actual Expenses vs. Standard Mileage
There are two ways to deduct mileage, and there are rules surrounding each method. To use the Standard Mileage method you must own or lease the car. Additionally, if a rep owns their car they must use the Standard Mileage method for the first year they use it for business. For a leased car, a rep can choose either method, but in choosing the Standard Mileage method they must continue to use it through the duration of the lease. The Actual Expenses method may offer a more desirable deduction because it takes into account things like gas, oil, repairs, depreciation, etc. but you must ensure your car qualifies to use this method.
3. Tracking Mileage
The fact that field reps can take advantage of this tax deduction is good news, but the detailed information the IRS expects to approve the deduction may be a bit of bad news. It’s likely that field reps using their own cars for business also use them for personal use. Reps must distinguish the personal miles from the rest, as only business miles are deductible. The IRS may accept quarterly estimates, but it is always better to have a log of exact numbers to avoid IRS pushback. Reps can do it the old fashion way, by writing down their mileage on paper each time they make a business trip. Yet, for reps who travel daily that method ends up taking up a lot of paper. Field teams may want to look into using a Field Activity Management software tool that, among other abilities, allows reps to log their mileage at the beginning and end of each day in their mobile phone. That way when tax season rolls around, back-office managers will have a digital receipt of the mileage tracked by each rep throughout the year.
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