If you're like most business owners, entrepreneurs or salespeople, you probably have a shoebox full of gas receipts. Your shoebox may be disguising itself as the floor of the back seat of your car, or the bottom of your desk drawer, but you probably have that "shoebox" nonetheless.
Unfortunately, you're going to have a big sorting job ahead of you when tax time rolls around. Not only are you going to waste your valuable time trying to get organized before you drop your tax return at your accountant's office - time that could be better spent growing your business - even worse, you probably aren't claiming all your eligible deductions and are, therefore, paying more in taxes than you should.
This year, why not throw that shoebox away and try something different? To save you time and money, set up a quick and easy tracking system to get your automobile expenses under control now instead of waiting until the tax deadline.
Quick and Simple Steps to Track Automobile Expenses
- Make sure you track all the eligible expenses for your car. These include your ownership costs like lease payments, depreciation if you own your vehicle outright (also known as capital cost allowance or CCA), or interest charges if you are financing to own. Also eligible are the expenses you incur to operate your vehicle like fuel, insurance, parking, car washes, oil changes and other maintenance costs, as well as all licence and registration fees.
- Create a file folder for each of these categories. Put your receipts in the appropriate file at the end of each day. Be sure to keep your filing system in a handy place like the file drawer in your desk. If your files aren't close by, it's too tempting to go back to that old shoebox. When it comes time to submit your taxes, all the sorting is done! You just have to total up the receipts.
- Create a spreadsheet with a column for each of the categories discussed above. As you file each receipt, take a minute to also add the expense to your spreadsheet. At the end of the year, simply total each column to quickly total up your automobile expenses. To simplify this process even further, use financial tracking software or services (like ours here at Mint) and make sure you use the category or memo feature to track each type of expense. At the end of the year, print out reports by category and you're done.
- You will also need to keep a mileage log. To do this, simply enter your starting and ending odometer reading in your planner, PDA, or smartphone calendar at the start and end of each workday. You could also use a free cloud-based calendar like Google Calendar so you can access your log from any Internet-connected device. At the end of each work week, month, or year, simply subtract the opening and closing mileage readings. As a backup, in case of a computer malfunction, write your odometer reading on your receipt every time you fill your gas tank.
- After you have filed your taxes, place all of your folders and printed spreadsheets or summary reports in a banker's box for future reference. Be sure to keep the info going at least five years back in case the IRS asks for clarification down the road.
- Once you have closed the year, create new file folders and repeat the process for the upcoming year.
Simple, quick, accurate and easy. More importantly, when it comes time to submit your taxes at the end of the year, all the grunt work is done. Now you can focus on more important things. Things like running your business!
Susan A. Enns is a B2B Sales Coach, Author and Managing Partner of B2B Sales Connections. She has a proven track record of success, with over 26 years of experience, and her books have sold on four separate continents.