Fines and Penalties for Insufficient Mileage Documentation – Explained

Have you heard about NOTICE 2007-54 of the IRS?

An IRS Notice called the  Preparer Penalty Provisions Under the Small Business and Work Opportunity Act was issued back in 2007. The act was initiated to increase the penalties regarding tax returns submitted with insufficient supporting documentation.

The Act increased the first-tier section 6694(a) penalty for understatements from $250 to the greater of $1000 or 50% of the income derived (or to be derived) by the tax return preparer from the preparation of a return or claim with respect to which the penalty was imposed. The Act increased the second-tier section 6694(b) penalty for willful or reckless conduct from $1000 to the greater of $5,000 or 50% of the income derived (or to be derived) by the tax return preparer.

In the case of a Business Mileage Tax Deduction sufficient documentation would mean Mileage logs. Understating the liability of claiming the deduction would mean not having Mileage logs to sufficiently support the Business Mileage Deduction Claim.

The IRS states clearly that you must keep “an account book, diary, log,  trip sheets, or similar record”  (IRS p463.pdf, Page 24 Chapter 5) in order to take the Business Mileage Reimbursement Tax Deduction on your taxes.

Luckily, the penalty under section 6694(a) would not be imposed if it is shown that there is reasonable cause for the understatement and the tax return preparer acted in good faith.

If you receive a 30 Day Audit letter from the IRS that means you have a month to reconstruct your mileage and prove that the deduction was claimed based on real-life vehicle-use.

So don’t panic!

With MileageWise you can make up for forgotten Mileage logs, with the AdWise feature and by checking 70 logical conflicts your recommended logs will be good to go and IRS-Proof, meeting Every Expectation.

After reconstructing your past Mileage logs, you can continue tracking your trips with MileageWise. Just as you would do it with any Mileage tracker. MileageWise can detect your trips automatically as well, but without using up your data and battery. When you arrive at a destination the App offers you a partner and the purpose of the trip from an already existing database. You can always add new partners to your list, which will then be available for you to use automatically in the future.

If you already use a Mileage Tracker App, you can import your already made Mileage logs to MileageWise and the Software will monitor 70 logical conflicts when making you a recommended log of your taste.

And if there’s too much to do in too little time, busy professionals can take advantage of MileageWise’s additional Outsource service, where a MileageWise Expert will prepare an IRS-proof Mileage log draft for them. It’s the same as handing over managing your Mileage logs to your Accountant.

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MileageWise is a Web Dashboard and Mobile App solution for creating IRS-Proof Mileage logs. By entering your trips to the Web Dashboard or automatically logging your miles with the Mobile App you can create IRS-Proof mileage logs even Retrospectively in just 7 minutes a month. You can also perfect your already existing Mileage logs by importing them into the Web Dashboard, as the software monitors 70 logical conflicts when processing and correcting a Mileage log making sure the result is truly IRS-Proof, meeting Every Expectation. If you forgot to log a trip, the AdWise feature helps you recover your lost mileage based on your past visits and other patterns and parameters you set.

With MileageWise Small Business Owners can get a deduction of $12,000 per tax year on their business mileage, Employers can establish an Accountable Reimbursement plan and Employees can claim more accurate business mileage quicker. Rideshare drivers can clarify and make an integrated mileage log from their fragmented logs. And Tax Professionals can radically reduce the time they spend on administrating their clients' mileage logs.

This release was published on openPR.