During the last few weeks, I’ve seen several taxpayers with misunderstandings about record keeping for a vehicle.
Here are some myths about a vehicle logbook:
- If you only drive in town, you don’t need a logbook.
- If your trips are all under 30 minutes, you don’t need a logbook.
- You only need to document the trips during the day. (OK, this one may be not be a myth for some people but it is for most people.)
Failure to maintain a logbook is a serious risk for any taxpayer.
It is the equivalent to your driving without your license and ownership papers.
Most of the time you won’t be stopped. But it may happen.
It is the policy of the CRA that a log book is the best evidence showing the use of the vehicle. They will insist on a full log book during any review or audit. Failing to provide a full logbook will move the audit from an objective review to a subjective review and, without evidence to the contrary, the auditor will have ultimate decision making in this respect. Unless you wish to go to court which may be more expensive than the benefits.
There is a requirement that the use of your vehicle be written. However, there is no requirement that the written log be on paper – it may be electronic. Taxpayers should refer to Publication 463 in addition to the IRS reminder about Car and Truck Expense Deductions. The remainder of this article is written in respect to Canadian, not US law.
Alternatives to Logbooks
A variety of options are available to a taxpayer who has failed to maintain a full logbook. The alternatives include using a diary or appointment book to recreate the logbook. Equally, you may create a logbook from a sample period and present this as an example of your consistent use of the vehicle. The latter is problematic in that the CRA’s policy in respect to sample logbooks is that a full 12 month period must be maintained for a prior period to be used as a baseline. I have had some success in contesting auditor’s determinations without a full logbook but each case will be judged on its merits.
Taxpayers should also take a comprehensive log of mileage for the first year of any new vehicle.
What does your logbook need to track
The following items should be tracked by your logbook:
- The odometer reading on January 1 of every year.
- For each business trip, record the:
- Purpose of the trip
- For each expense such as gas, oil change, etc., record the:
- Odometer reading (for service work only)
(Notice that most invoices provided by vehicle service shops provide you with all of the above information.)
If you are being reviewed…
If you are being reviewed or audited and the letter requests a logbook, get it ready. If the auditor requests in person even though it was not in the letter of required items, tell the auditor that you don’t have the log book with you and you will have to get back to them on that point. (The auditor did not request it so you did not get it out of storage.) Get a date to return it to the auditor and then immediately review your documentation to organize the log book. Remember that the newest trick of auditors is to pull the vehicle maintenance records and verify the odometer readings against your logbook.
Here is a search for Free Vehicle Mileage Log.
While you can use a cheap book from your nearest vehicle or office supply store, I have been asked for electronic record keeping programs for vehicles. I would recommend an application which runs on your cell phone or handheld so that it is easy to record when you have a moment. Here are some choices, none of which are endorsements:
- iPhone : Gas Cubby and Trip Cubby
- Blackberry: VQ Mileage Tracker
- Android: Triplog (Now an integrated Android, iPhone and Web package)
Another application which I’ve seen in use, that may be useful is called GasBuddy. This application locates the closest gas station to you at the cheapest price. It is provided by GasBuddy.com and is available on iPhone, Android, Blackberry and Windows phones.
Do you have other methods you use to log your vehicle use? Please use the contact me tab and I will post your comments. This is one case where I will allow marketing firms to refer to their products and may even modify my post to refer to their products. I am also interested in comments by people who use vehicle logbooks as to their difficulties or ways they found to make things easier for them.