Why is tracking your mileage so important? In this article, you’ll find out why this simple-seeming aspect of being a gig driver can be a big factor in your profit or loss from rideshare driving or delivery work. Mileage tracking deserves your full attention because it’s a major source of tax deductions for gig workers.
You’ll see why when you discover what either a complete lack of or inadequate mileage tracking can cost you. Here are some of the most common mileage tracking mistakes drivers commit, and smart ways to avoid making them.
#1 – Totally neglecting to track your mileage
Let’s start with the biggest mistake. You want to track your mileage because you can deduct it from your income and reduce your taxable income. If you fail to do track mileage, you could end up paying much more in taxes than necessary.
For example, using the IRS rate of 62.5 cents per mile (in effect from July–December 2022), a part-time driver who put in around 17,000 miles over six months would be able to deduct $10,625 from their income. A full-time driver, clocking about 25,000 miles in six months, would receive a deduction of $15,625. And that’s just for half of the year.
There is no way any driver would want to miss out on such a sizable Lyft, DoorDash, or Uber tax deduction! The point is clear: you definitely want to track your mileage.
But, for the sake of argument, let’s say that you neglected or forgot to do so. It’s possible to wait until you’re preparing your taxes to start calculating your mileage, but it’s not a good idea. For one thing, it will be hard to reconstruct your entire year of driving, particularly if you work with more than one app. As we all know, dealing with gig economy taxes is painful enough, and not having solid records would make it all that much more excruciating.
The Fix: Create consistent records of your business mileage, using anything from a pen and notebook to a sophisticated app like Gridwise. Record all the miles you clock while you are on your driving app, whether it’s with a pencil and paper or a state-of-the-art mileage tracking app.
When you use Gridwise to track your gig driving mileage, every mile from every shift is recorded into an exportable file that you can use when filing your taxes. Read more about how to track your mileage with Gridwise in this post.
#2 – Failing to keep detailed records
Keeping track of the number of miles you drive while you’re working your gig helps you know how much you can deduct from your income—but that’s not always enough. When you are dealing with the IRS, it’s always good to act as if they’ll decide to audit you.
IRS agents are notorious for questioning the deductions independent contractors take, so if yours becomes the return an agent decides to dig deeper into, those mileage numbers might not suffice. They will want the details, and they won’t stop squeezing you until they get them.
You will need to have access to the date, destination, and purpose for each trip notated. That’s not so difficult when you’re a gig driver, because the destination and purpose are pretty much the same for every shift. With that said, you still have to be very thorough about ensuring that you have an accurate account of your mileage.
You might wonder, does Uber keep track of mileage? The answer is “yes, but…” and that goes for all the other apps you drive for as well. Keep in mind that the mileage the driving apps track are those for which they pay you. So if you go to a destination and the customer cancels the trip or delivery, that mileage won’t be included in the apps’ calculation.
The Fix: Use Gridwise to track each and every deductible mile you travel while you are on your shift. Simply log on when you begin driving and log off when you’re done for the day.
#3 – Mixing personal and professional mileage
This is a big no-no, and if you get caught doing it, you will be penalized. It’s very important to distinguish between the miles you drive for business and those you rack up for your personal needs.
This is why taking manual readings from your odometer is not a safe or adequate way to monitor mileage. Sure, you can hope that you’ll remember to record your mileage when you pause your gig driving to pick up your child from school. In reality, that’s really hard to do, and you probably won’t remember every time. This can result in inaccurate readings, and that can lead to—IRS trouble.
The Fix: Use Gridwise to track your mileage and eliminate this kind of confusion from your life. Simply log in when you start gig driving and log out when you’re done. That way, you won’t still be logging business miles when you begin a personal trip. You won’t be racking your brain trying to calculate the mileage you incurred, particularly if that after school run involved a moment at the local snack shop or an extra stop to do a friend a favor.
#4 – Losing receipts and other documentation of expenses
How many times have you stuck your hand in the pocket of your jeans or coat and found a bunch of crumpled up receipts in there? If this is something that you experience with regularity, you may want to consider getting more serious about saving receipts for items that can be considered tax deductible.
It’s a lot to ask, in an age when we do almost everything on some kind of electronic device, to actually file away little slips of paper in any semblance of reasonable order. Still, you never know when you’re going to have to present a receipt for those candy bars you bought to hand out to your customers on Halloween, or prove that the trip you’re claiming as a deduction was really for business purposes.
The Fix: You probably have ways of tracking your spending through the debit or credit card you use. It is, after all, wise to keep a separate account for personal and business expenses, so they are easier for you to track.
You also can use a slick tool to help you keep a running account of all those little expenses, as well as pricier items such as car maintenance and repair. Gridwise has two ways to help you.
- Record your expenses as they arise, right in the app.
- Use Gridwise Tax Help, powered by Keeper Tax. Gridwise Tax Help features automatic receipt tracking, so you can jettison the nightmarish image of that shoebox overflowing with wrinkled slips of paper. This feature caters directly to the specific issues that come up with taxes for gig workers.
#5 – Rounding your mileage numbers
Tax auditors look for certain “flags” that indicate a taxpayer might be exaggerating, or even pulling from thin air, the numbers on a return, especially when it comes to Lyft, Amazon Flex, or Uber mileage deduction.
Therefore, if they see numbers that are rounded off, they’re going to begin to dig deeper, and before you know it you could hear that you’re about to be the subject of an IRS or state audit. That’s why you don’t want to guesstimate your mileage, or even innocently round the numbers off.
The Fix: Keeping honest, exact, and documentable records of your mileage is your safest best when it comes to preparing your deductions. When auditors see “real” numbers, they’re likely to assume that all your reporting is on the up and up.
When you use Gridwise, you’ll ride with the best mileage tracker for delivery drivers and rideshare pros. Let Gridwise record all the numbers you need to keep you free from unwelcome scrutiny.
6. Ignoring tax laws and regulations
Many gig workers, when they begin as independent contractors, believe that filing taxes isn’t going to be any more complicated than submitting information from a 9–5 full-time corporate job. That’s a huge mistake.
The nuances of filing taxes as an independent contractor can easily get you caught up in errors that cost you money. For instance, are you aware that you can be penalized if you don’t file your taxes quarterly? And how would you answer if someone said “Quick, tell me the IRS gas mileage rate USA 2023”? Fortunately, you can read this Gridwise blog post on the topic of the 2023 gas mileage rate, but that’s not the only thing you’ll need to be aware of.
The Fix: Get professional help.
You need to know a lot of little bits of information, and be up to date with all the tax laws and regulations that affect your life as a gig driver. It’s possible to do this all on your own, but you don’t have to. Gridwise Tax Help, powered by Keeper Tax gives you
- access to a tax professional
- algorithms that scan your transactions for deductible expenses you might have missed
- automatic mileage reports from shifts tracked with Gridwise
- the ability to e-file your taxes, right from the app
You can’t afford to use anything but the best mileage tracking app out there—Gridwise!