Question:
Let’s say you are under IRS audit for business mileage. You claimed business miles at the IRS optional rate. The IRS has requested odometer readings for the vehicle.
Is this proper?
Should you have to provide odometer readings when claiming the business vehicle deductions using the IRS optional mileage rate?
Answer:
The tax code says that you must substantiate your business vehicle deductions by adequate records or by sufficient evidence corroborating your own statement, including the time and place of the travel and the business purpose.
The standard mileage rate does not reduce the need for vehicle mileage records. In other words, the need for the records that prove business mileage does not change when you use the IRS standard mileage rate.
They are the same mileage records you need with the actual expense method.
IRS Audit Manual
Here’s what the IRS, in its Internal Revenue Manual, tells its examiners to do when looking at business miles:
To verify total miles for the year, the taxpayer should provide repair receipts, inspection slips or any other records showing total mileage at the beginning of the year as well as at the end of the year.
Takeaways
The burden of proof is on the taxpayer.
The IRS is simply asking that you prove your mileage as required by the law. The request for the odometer readings at or near the beginning and end of the year is a reasonable request.