From good record keeping to deducting expenses on operating vehicles, the Internal Revenue has tips for small business owners to help make their operations run more efficient.

For example, businesses that use a car or other vehicle may be able to deduct the expense of operating that vehicle on their taxes, the IRS said in a release. Businesses generally can use one of the two methods to figure their deductible vehicle expenses:

  • Standard mileage rate.
  • Actual car expenses.

For 2019, here are the standard mileage rates for calculating the deductible costs of operating an automobile for business, charitable, medical or moving purposes:

  • 58 cents per mile driven for business use;
  • 20 cents per mile driven for medical or moving purposes; and
  • 14 cents per mile driven in service of charitable organizations.

Of course, business taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates. Here are some facts to help business owners understand the differences between the two methods of figuring their deductible vehicle expenses, according to the IRS:

  • Businesses that want to use the standard mileage rate for a car they own must choose to use the standard mileage rate in the first year they use the vehicle. Then, in later years, they can choose to use either the standard mileage rate or actual expenses.
  • If a business wants to use the standard mileage rate for a car they lease, they must use this rate for the entire lease period.
  • The business must make the choice to use the standard mileage rate by the due date of their return, including extensions. They can’t revoke the choice.
  • A business that qualifies to use both methods may want to figure their deduction both ways to see which gives them a larger deduction.
  • Here are some examples of actual car expenses that a business can deduct, the IRS added:
    • Licenses
    • Gas
    • Oil
    • Tolls
    • Insurance
    • Repairs
    • Depreciation – limitations and adjustments may apply

Businesses can see Publication 463, Travel, Gift and Car Expenses (PDF), for a full list of actual expenses and how to calculate them.

Keeping records is key

If you’re a small business owner you should be keeping good records, according to the IRS. This applies to all businesses, whether you have a big staff or just a handful of workers. Whether the employees install software or make soft-serve ice cream cones, cut hair or cut lawns, keeping records is an important part of running a successful business, the IRS said in a release.

Here are some questions and answers prepared by the IRS in an effort to help business owners understand aspects of smart record keeping.

Why should business owners keep records?

Good records will help:

  • Monitor the progress of the business;
  • Prepare financial statements’
  • Identify income sources;
  • Keep track of expenses; and
  • Prepare tax returns and support items reported on tax returns.

What kinds of records should owners keep?

Small business owners may choose any record keeping system that fits their business. They should choose one that clearly shows income and expenses. Except in a few cases, the law does not require special kinds of records, the IRS said in the release.

How long should businesses keep records?

How long a document should be kept depends on several factors. These factors include the action, expense and event recorded in the document. The IRS generally suggests taxpayers keep records for three years, it said.

How should businesses record transactions?

A good record keeping system includes a summary of all business transactions. These are usually kept in books called journals and ledgers, which business owners can buy at an office supply store. All requirements that apply to hard copy books and records also apply to electronic business records, the IRS said.

What is the burden of proof?

The responsibility to validate information on tax returns is known as the burden of proof. Small business owners must be able to prove expenses to deduct them.

How long should businesses keep employment tax records?

Business owners should keep all records of employment taxes for at least four years.

Source IRS