Use Mileage Tracking Apps to Save More at Tax Time
Contractors drive an average of 75 miles every day, according to a recent study by The Aberdeen Group. Those miles equate to more than $10,000 in tax write-offs each year However, the vast majority of miles go unreported and dollars are never claimed due to lack of awareness or failure to use tracking technology.
While driving may just seem like part of the job, traveling to jobsites, driving to get supplies or even a quick trip to sign paperwork can all equate to mileage that companies can get back at the end of the year. They just need to be using the right tools.
Over the past few years, a handful of mileage tracking tools have arrived on the market, including the following.
Pros: One of the original apps.
Cons: outdated technology and no automatic tracking
Pros: Great interface and automatic tracking.
Cons: Mileage only
Pros: Featured by Apple and Google, and 100 percent automatic mileage and transactions
Cons: New app and currently no web dashboard
These apps can benefit construction professionals of all types—from the independent contractor to the supervisor overlooking a large team. They can save time, money and headache throughout the year.
Here’s why construction contractors and their employees should be using mileage tracking tools.
PREVENT IRS NIGHTMARES
The IRS has a reputation for being skeptical when it comes to taking mileage deduction. That’s not to say it doesn’t want contractors to use the deduction, it just knows that many folks are overly generous.
For that reason, the IRS requires a burdensome list of specifics that need to be recorded for each trip. A mileage tracking app can take care of the compliance headaches for the user. Apps automatically track trips, mileage, addresses and deductions in a mileage log that can be sent to the accountant during tax season, or just to keep on file for end-of-year taxes.
To deduct mileage, the IRS requires contractors to record:
- Miles driven;
- Dates of each trip;
- Driving destinations; and
- The business purpose of the trip.
You will also need to distinguish between business and personal mileage on the vehicle. This information can be a lot to keep track of, but a quality tracking app can automate the process by running in the background of your phone. It’s a true set-it-and-forget-it method to track your mileage.
TRACK EVERY TRIP
Most people remember the longer drives, but what about the shorter ones? The trips to the post office? That quick supply run? An automatic app will make sure every single drive is recorded. For reference, check out past logs kept without an app. Did you catch every single drive? The times you drove to the gas station? Going to get coffee or lunch for the team?
All of these are deductions that can help contractors save money each month. And with the 2017 mileage rate set by the IRS at 53.5 cents per mile, those drives add up fast. In fact, the average mileage app user logs $535 in deductible drives per month.
TIME EQUALS MONEY
While time is money is a bit of an overused statement, it’s still true. Contractors that track mileage with a pen and paper know how tedious it is. It’s not only tedious, but writing down every trip, reason, location and date is time-consuming. By using an app to save time, contractors can save money as well. If their billable rate is $50 per hour, a mileage tracking app can be worth $3,600 in billable hours per year.
CREATES A DIGITAL LOG FOR EASY REPORTING
Tracking apps also save contractors the hassle of crafting an online log. Not only is this good for bookkeeping, but it’s also great for accountants. Most people who manually track logs are doing it on paper and transferring to an excel sheet. Or they may just hand the paper log to the accountant at the end of the year. This can result in inaccuracy (and frustrated accountants or accounting departments) and takes time away from everyone.
With apps, tracking mileage and sending reports can be as simple as a swipe that sends the contractor and its accountant a detailed report on mileage, trip type and more.
TRACK ADDITIONAL EXPENSES
It’s rare that contractors go out and just drive, right? There’s gas to buy, client lunches, coffee runs and supplies. Some tracking apps also have the ability to log these other expenses. If contractors don’t want to record that information manually, select apps will link with their bank, so it will automatically record business expenses in the app.