Driving for platforms like Uber Eats or DoorDash can be an effective way to earn extra income or build a full-time gig. However, one of the most essential tasks for delivery drivers is ensuring that mileage records are accurate and compliant with IRS requirements. Maintaining detailed records can not only maximize your tax deductions but also keep you prepared in the event of an IRS audit. Here’s everything you need to know about mileage record-keeping as a delivery driver and how it can affect your bottom line.
The Importance of Mileage Tracking
For Uber Eats and DoorDash drivers, mileage is one of the most significant expenses eligible for tax deductions. The IRS allows taxpayers to deduct a specific amount for each business mile driven, which can add up to substantial savings over the course of a year. For 2024, the standard mileage deduction rate is set at 67 cents per mile. Considering the amount of driving that many delivery drivers do, these deductions can lead to significant tax savings.
But here’s the catch: to claim this deduction, you need to maintain thorough and accurate records. The IRS is strict when it comes to mileage deductions and requires specific details in your logs to prove that your mileage was indeed for business purposes.
What You Need to Include in Your Mileage Log
The IRS mandates that anyone claiming a mileage deduction must maintain a mileage log that includes:
The date of each trip: You must record the exact date of each delivery trip. This helps keep your records organized and supports your case in the event of an audit.
The starting and ending locations: This means documenting where your trip began and where it ended. While you don’t have to include exact addresses, noting landmarks or general locations (e.g., “Main Street, City Center to Oak Lane, Suburb Area”) is sufficient.
The purpose of the trip: You need to indicate that the trip was for business purposes. For delivery drivers, this means specifying that the trip was to pick up and deliver orders.
Total miles driven: You must calculate the distance covered during each trip. This can be done with odometer readings or a digital app.
While these are the primary elements required, it is important that drivers log their vehicle’s odometer readings at the start and end of the year. This helps establish total annual mileage, which, in case of an IRS audit, can help establish proof of miles driving. If you own two cars and use each for your driving gig, be certain to track each vehicle’s odometer.
The IRS really likes proof of the annual mileage in audits. My favorite way to do this is to simply turn on date-stamping on a cell phone and to take a photo of the odometer at the beginning and the end of the year. Another source of proof is to register your car’s VIN with Carfax.com. Most car service companies report the car’s mileage whenever they are serviced. This gives drivers independent corroboration of their mileage in case of an IRS audit.
Acceptable Ways to Keep Mileage Logs
Gone are the days when drivers had to rely solely on paper logs to keep track of their mileage. While a pen-and-paper notebook is still acceptable, many modern tools can simplify the process and ensure accuracy. Here are a few options to consider:
1. Paper Logs: These are the traditional way of logging miles. Simply carry a small notebook in your vehicle and jot down the required details for each trip. Although it’s manual, some drivers prefer this method as it’s straightforward and requires no tech.
2. Digital Spreadsheets: Tools like Excel or Google Sheets offer a more organized way of tracking your mileage. You can create a simple table with columns for the date, starting and ending locations, purpose, and total miles driven.
3. Mileage Tracking Apps: For those who want to make life easier, mileage tracking apps are a great choice. Apps such as Everlance, MileIQ, and TripLog can automatically track your miles using GPS. They’re programmed to distinguish between personal and business trips, making record-keeping seamless. Many apps even generate IRS-compliant reports, which can be a lifesaver at tax time.
Why the Gig Platform’s Built-In Tracking May Not Be Enough
Both Uber Eats and DoorDash provide some level of mileage tracking for their drivers. However, this built-in tracking often only records miles driven while you are on active deliveries. It may not include miles spent driving between delivery zones, heading back home, or positioning yourself for the next order. These additional miles can add up and are potentially deductible, but only if you track them independently.
Relying solely on the tracking provided by these platforms could mean missing out on substantial deductions. This is why many drivers choose to use third-party mileage tracking apps or supplement their platform-provided data with manual logs.
Best Practices for Comprehensive Mileage Tracking
To make sure you’re getting the most out of your mileage deductions, follow these best practices:
1. Log Your Trips Regularly: Don’t wait until the end of the week to catch up on your mileage logs. Try to log your trips as soon as you complete them. This habit will help ensure accuracy and keep you organized. It only takes a minute, and can potentially save you a lot of money on your taxes.
2. Separate Business and Personal Miles: Be diligent about distinguishing between business and personal driving. Only miles driven for business purposes are deductible. For instance, the drive from your home to the restaurant to pick up an order is deductible, but stopping to run personal errands along the way is not.
3. Keep Records for a Minimum of Three Years: The IRS can audit tax returns filed within the last three years, so you should retain your mileage records for at least this long. If there’s a significant error, the IRS may look back further, so having comprehensive records is always a smart move.
What Happens if You’re Audited?
If the IRS decides to audit your mileage deduction, they will request detailed records that support your claim. This is where thorough and accurate logs can make a big difference. Without these logs, you could face fines, penalties, or the loss of your mileage deduction. Providing a well-maintained mileage log that includes the date, locations, purpose, and total miles driven is the best way to substantiate your deduction and avoid complications.
If you haven’t kept mileage records and you find yourself the subject of an IRS audit, you may want to hire a tax professional such as an Enrolled Agent, CPA, or Tax Attorney. My firm has been able to help clients who were under audit keep their mileage deduction in the face of missing or incomplete mileage records. We do this by reconstructing records using reasonable methods, such as reviewing calendar appointments, delivery logs, GPS data, and even credit card receipts to establish a pattern of business driving. We then disclose the reconstructed records to the IRS, while making a legal case for them to accept the reconstructed records. While this approach may help defend your deduction, it’s always more reliable to maintain detailed logs from the start. Working with a tax professional who understands the intricacies of IRS requirements can provide peace of mind and improve your chances of a favorable audit outcome.
Final Thoughts
For delivery drivers working with Uber Eats, DoorDash, or similar platforms, keeping an accurate mileage log is more than just a good practice—it’s a financial necessity. The IRS standard mileage deduction can save you a significant amount of money come tax time, but only if you have the records to prove your claim.
Choose a method that works best for you, whether it’s a simple paper log, a digital spreadsheet, or a mileage tracking app. Log your trips regularly, distinguish business from personal miles, and make sure your records are organized and up-to-date. These small steps will ensure that you maximize your deductions and protect yourself in the event of an audit.
The content on this blog is for informational and educational purposes only and should not be considered as specific tax, legal, or financial advice. Tax matters are highly individualized and depend on various factors unique to each situation. While we strive to provide accurate and timely information, it is essential to remember that the tax code is complex and constantly changing. Before making any decisions or taking action based on the information provided here, please consult with a qualified tax professional who can analyze your specific circumstances and offer tailored advice. The author and publisher disclaim any liability for actions taken based on the content of this blog without seeking professional guidance.
© 2023-2024 Boon Tax Resolution LLC, All rights reserved.