Mileage Deduction

[Loveleigh124]

I worked for instacart and point pickup (Walmart delivery) in 2020. This will be my 1st year filing self employment. I was trying to see how the mileage deduction works if I didn’t really keep up with my mileage over the course of 2020. I saw that you can estimate but is it okay to say on the form that I didn’t keep up with them and will the IRS require proof of any miles I claim? Will I get audited? I’m scared.

[RayW7]

Yes, if you use the standard mileage deduction you need to keep accurate records.

You have two optional methods to calculate your mileage expenses when using a personal vehicle for work purposes. If you don’t mind keeping receipts for every expense, you can calculate your deduction using actual expenses, including depreciation, licenses, gas, oil, tolls, lease payments, insurance, garage rent, parking fees, registration fees, repairs, and tires.

Your deduction is based on your business use percentage, i.e., your business miles as a percentage of your total miles.

The second method is to multiply the miles you drive for work by the Internal Revenue Service standard mileage rate, which changes every year (and sometimes twice a year).

Regardless of the circumstances of your employment, you will likely be asked to record the following:

• "the mileage for each business use"
• "the total mileage for the year"
• the time (date will do), place (your destination), and purpose

This is what the IRS considers adequate records (scroll to table 5.2 for an example) when it comes to logging business mileage.

It is also required that the record is timely. This means that it must be made at or near the time of the trip. Anything that is updated weekly is considered good enough. 

If you're self-employed or a business owner, you need to adhere to the IRS's definition of adequate records. Keep in mind that the rules cover all transportation-related expenses.

Paper, diary, account book, digital spreadsheets, CSV files, PDF files, Xlsx (Microsoft's Excel) are all accepted by the IRS. In other words, the format does not matter as long as the right records are present (see "Adequate records" above).

The IRS actually provides a paper template, but it is from a time before electronic mileage logs. We do not recommend that you try to keep records by hand, mostly due to how tedious it can get.

[Loveleigh124]

Ok I know all of that but will the IRS ask for proof or is that if I get audited?

[JohnW152]

You won't need to provide any proof when you file your return.

However, you'll need to be able to substantiate what you're deducting if the IRS does audit you.

[Opus 17]

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@Loveleigh124 wrote:

Ok I know all of that but will the IRS ask for proof or is that if I get audited?

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Under the law, all your income is assumed to be taxable unless you prove otherwise.  You don't send proof with your tax return, but if audited, you must provide sufficient proof of your expenses or the deduction will be disallowed.

The Instacart app may track your mileage for you.  If not, there are other apps that will track business miles, or you can use a simple paper diary or log book in your car that records the date, place, business purpose, and mileage of each business trip.  If you are "on duty" for several hours at a time (either making deliveries or at the store making up orders) then it may be enough to have the total mileage for the day, as long as you don't mix personal and work trips.