Every year during tax season, many gig workers panic because they’ve forgotten to track their miles. There's a lot of confusion about what to do in such a case, which makes things worse.
If you're in this situation, don’t panic. You can still possibly deduct expenses for using your car, but it’s going to take some work. This article will guide you on what to do if you haven’t tracked your miles.
Here’s the bad news. You need your total miles and work miles for the year, with evidence to back up your numbers, if you’re claiming vehicle expenses when you file your taxes. It doesn't matter which method you use to calculate the deduction amount. The requirement applies for both:
Here’s the good news. The IRS allows people to put together their mileage numbers based on incomplete records.
You need to have:
Could you not, you know, make up some numbers or guess? No, not really.
There is a law that allows taxpayers to estimate deductible amounts of some unsubstantiated expenses. But that doesn’t apply to auto expenses. So you definitely need to support your mileage claim with evidence.
Making up numbers is a terrible idea. Auditors are good at spotting imaginary numbers; if they suspect anything, they’ll disallow your deduction. You won’t be able to claim any miles or car expenses if you try that. What’s more, lying on your tax returns will get you fined. Instead of saving money, you’ll end up losing money.
The IRS requires timely kept records to help justify the number of miles you drove for work. That means when you’re putting together your work miles, you should use evidence that is from around the time the miles were driven.
First, find out which days you were doing gig work.
The ideal scenario is to use sampling. If you tracked miles on some of the days you drive for work but not all, you may be able to use this method to determine your total work miles for the year by extrapolating from your sample.
[.866][.blue-line]Sampling.You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year.[.866][.blue-line]
- IRS Publication 463 (2022), Travel, Gift, and Car Expenses
"Adequate records," in the eyes of the tax authorities, are 3 months (90 days) or one week of each month. The three-month period could be any three months of the year. The week-a-month period needs to be the same week of each month. You also need to make sure your sampling period is as representative as possible of how much you drove for work the rest of the year.
However, if you don’t have a sufficient sample, you still have options to determine the miles you drove for work. Once you know which days you made money with each platform, you have a starting point for figuring it out. You can look at:
An IRS-compliant mileage log should include for every work trip:
Creating this mileage log serves as a statement explaining how you came up with the number of miles you drove for work purposes.
You should also save the documents you used for information in case you get asked to produce them. Save them all - the emails, the screenshots and documents exported from apps - into one folder. These are the evidence to backup your statement and if the IRS comes calling, you’ll probably need to provide them.
Finally, prepare a written statement on how you got your numbers.
To save as much as possible on your taxes, make sure you're claiming as many other work-related expenses as possible. Mileage is not the only thing you can write off. Paying more attention to other write-offs can help you reduce your taxes. Learn about the best tax deductions for DoorDash drivers here.
In addition to the number of miles you drove for work, you also need to report the total number of miles you drove for the year. When you fill out your Schedule C tax form, it asks for your business-related miles, commute miles and personal miles. So you need your total annual mileage.
If you're driving for work, it's a best practice to jot down your odometer reading at the start of the year and again at the end of the year. The difference is your mileage total.
If you didn't, there are other places to look to figure out your total mileage number.
The IRS uses these mileage numbers to check if a reasonable percentage of your driving was for business purposes. Remember this point throughout the process of putting together your mileage records and evidence. At the end, you can (and should) also do your own check that your percentage of business use seems reasonable. Just divide your work miles by your total miles.
If you're using the actual expenses method, this formula is how you determine your business use percentage. You'll then multiply that number by your total car expenses to calculate how much you can claim on your taxes.
Reverse-engineering your mileage is tough. There is a chance your claim won’t stand and you might be asked to produce evidence to back it up.
What’s more, trying to create a mileage log at the last moment just adds to the stress of the tax season. You’re much more likely to make mistakes and miss out on deductions.
Tracking your mileage properly is the best way to avoid the hassles. It:
You should start tracking your mileage to avoid missing out on tax deductions.
The IRS accepts any log format as long as records are adequate. Pieces of paper, handwritten logs, digital spreadsheets and other digital document formats all count. So you can track your mileage manually or automate the process.
However, tracking your mileage manually puts you back to square one. You’re already busy with your gig and everything else going on in your life. Why create work for yourself?
The best way to track your mileage is to use a mileage tracking app. It
But all mileage trackers are not created equal. Some still require manual input from you. Some are unreliable and clunky. Some of them are hard to navigate or plain too expensive.
Being a gig worker is taxing (no pun intended). The last thing you want is to be saddled with a mileage tracker that takes time away from your actual work or gives you a faulty log.
Everlance is the most accurate mileage tracking app on the market - made to make life easier for anyone who drives for work. We understand gig workers need to save as much as possible from your earnings. We also get the need for minimal effort tracking.
That's why over 1.5 million people use Everlance, including 500,000 DoorDash drivers. The average Everlance user reports a whopping $6,500 in tax deductions every year.
Get started for free today and never deal with the stress of forgetting to track your miles again!