how do I record mileage?

[Chris Ryan]

I just took an overnight trip to a conference, where I had a booth in exhibit hall. First time! Recording the hotel cost is straightforward. How do I record the mileage cost, at the IRS rate? I have an expenses:marketing account, and expenses:travel. I'm thinking I could use either for one part of the transaction, for $X, but where should I put the other part of the double entry, for -$X?

Thanks.

--
Chris Ryan
rya...@fastmail.co.uk

[Simon Michael]

How does mileage cost work Chris ? Is it really an expense ?

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[Chris Ryan]

Well, the IRS thinks it is.

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Chris Ryan
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[Francesco Ariis]

On Sat, May 4, 2024, at 03:34, Simon Michael wrote:
> How does mileage cost work Chris ? Is it really an expense ?

> Il 04 maggio 2024 alle 08:59 Chris Ryan ha scritto:
> > Well, the IRS thinks it is.

It may well be, but you need to describe what happens exactly, as
this looks like more like a tax credit than a plain expense.

Is this correct? Can you subtract fuel-expenses--at-IRS rate from
what you own to the govt?

[Chris Ryan]

I have a single-member LLC. I, representing that LLC, drove 336 miles, round trip, in my personal car, to exhibit at a trade show, to attract clients. In the US, business expenses can be deducted from business income (a gross oversimplification, but it serves for my purposes.) the US IRS uses 67 cents/mile to account for fuel, wear-and-tear on the car, etc. So that's 0.67 x 336 = 225.12 USD. I should be able to subtract that from my business income on next year's federal US income tax return. The income from my LLC would be taxable only to the extent of income - expenses = taxable portion. So I need a way to record that 225.12 USD. Can hledger accomodate it?

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Chris Ryan
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[Simon Michael]

Hi Chris,

hledger is a general double entry system, so yes certainly there must be a way.
Since I'm a dummy about tax I had to look this up for more context:
https://www.irs.gov/tax-professionals/standard-mileage-rates (and a few other pages). Yes I see what you mean, it seems you're entitled to a $225.12 deduction for your business use of personal car.

I don't know what the conventional tax accounting is for this situation, but personally I'd find it a little hard to see this intuitively as an expense. A "contra-income" (income amount with the usual sign reversed) would make sense to me. My next question would be what to balance that against, and here I'd follow my usual rule of thumb and use equity since I don't yet see a better choice. (Or one could use an unbalanced posting.)

Try searching for "journal entry for irs mileage credit" or similar.
https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/re-recording-owner-s-mileage/01/214514#M9980 says it's not an expense.
https://money.usnews.com/money/personal-finance/taxes/articles/everything-you-need-to-know-about-claiming-a-mileage-tax-deduction says it's an expense to be recorded on Schedule C line 9 (if self employed).
In fact, from my quick research there seems very little discussion of recording this in an accounting ledger, the recommendation seems to be to track it in a separate mileage log and just plug it into the tax forms.

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[Simon Michael]

Maybe ignore the off-the-cuff brainstorming in my second paragraph, after "I don't know what the conventional tax accounting is for this situation". :)

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[Chris Ryan]

Simon--

That's pretty much what I found too:

https://www.sadaccountant.com/journal-entry-for-mileage-expense-simple-guide/

"The best approach: Use a separate tracker instead of adding these figures to the general ledger or booking a journal entry."

Alternative: "Debit Mileage Expense and credit Owner’s Equity."

It just annoys me to maintain a separate record; always like to have things in one unified place.

But maybe I can think it through. There are two entities involved here: me (CWR) and the business. The business does not own a car. CWR uses his own private car for a business trip, for the benefit of the business. So the tax deduction is CWR's, not the business's. Hence the advice that CWR should keep his own separate mileage log, and deduct it from his own incom, and none of this goes into the business books at all.

However, the business is a single-member LLC, which the IRS considers a "disregarded entity." Meaning yes, the business is a separate *legal* entity, but CWR and the business are a single *tax* entity. All business income (or losses) are considered to be CWR's income (or losses.) There is only a single tax return. That's where it gets confusing.

I wonder if it would be clearer if the business *paid* CWR for the use of CWR's car on the trip. CWR would then *not* be eligible to deduct mileage costs on CWR's tax return, because they were reimbursed by the business. But CWR's tax return *also* includes the business (schedule C). And the business incurred an expense (paid CWR for use of CWR's car). So journaling that would have the same effect as CWR taking the income tax deduction. The journal entry would look like"

2024-05-06 check to CWR ; pay owner for use of car to travel to trade show
expenses:travel 225.12
assets:checking -225.12

What do you think?

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Chris Ryan
rya...@fastmail.co.uk

[Will Robinson]

Option 2 on the page you linked credits owner's equity, and FWIW that was what made intuitive sense to me for this as well. You're putting equity into the business in the form of "use of your personal vehicle."

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[Simon Michael]

That's a great page you found - I would follow its advice, either 1 or 2. I'm pleased that I came up with 2 and that Will agrees.

I also think it's fine to use any categorisation that makes most sense to you, the IRS won't care much as long as the number is right.

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[Simon Michael]

PS and if you choose option 1, there's no need for multiple documents, journal format is more than flexible enough to include the mileage log as comments or unbalanced postings, perhaps to an imaginary account.

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