I like to go fast! Putting my foot down on the accelerator of a Corvette and going full throttle is my dream.

But just like there are rules of the road we must follow, there are also rules for automotive tax deductions. Auto deductions have recently become a red flag because the IRS (hurting for tax revenues) is cracking down on all deductions – and they know auto deductions are where businesses do a lot of hanky panky.

One client of mine is learning this the hard way. His wife is a stay-at-home mom and once or twice a week she helps him deliver packages and paperwork. Before working with us, he’d been deducting the entire operation of her vehicle on his tax returns.

The problem is that the IRS flagged his return for audit and is questioning the deductions on his wife’s vehicle. Aside from the hassle of the audit, he may wind up paying Uncle Sam back taxes, a penalty and interest. No fun.

So what can you deduct when it comes to the business use of a car? The good news is that almost everything is deductible – IF you use the car 100% for business. If you use the car for both business and personal purposes, you need to deduct a percentage, either by keeping track of all your vehicle-related expenses or by tracking your mileage. The IRS lets you choose whichever method gives you the greatest deduction.

Let’s be honest – you probably hate tracking this stuff. So here are some tips for how to do it (more) easily:

If you track actual expenses, keep an envelope in your glove compartment, and every single time you get gas, tires, service, car wash, etc., put the receipt in this envelope and give it to us (or your bookkeeper) every week or month.

If you opt to track mileage, then there’s an app for that!! Almost every handheld PDA offers mileage tracking apps. Download one of those, and use it! A few of these are: Mileage Log, Vehicle Log Book, and Gas Log. Note that the deduction is $.50 per mile driven for business in 2011.

Here’s an idea if you keep a good electronic calendar (i.e., Google Calendar/iCal/Outlook). When you book an appointment, note the estimated roundtrip mileage. Every month, print out your calendar and give it to your bookkeeper, let them add it all up for you. One client of mine has her assistant do this for her.

Ride a bike! If you never use your car for personal reasons, then you can deduct everything (just kidding).

Before you hit a speed bump on your IRS tax return, remember you have a couple of options when it comes to automobile deductions. The rules are tricky, so give us a call at DM Accounting… we’ll zoom past the tax burden and get you on a smooth road to tax success this year.

Wishing you great success and LOTS of $$$ in 2011!

Tags: auto deductions, automotive deductions, keeping track of mileage, miami accountant, miami bookkeeper, mileage deductions, QuickBooks accountant, QuickBooks Bookkeeper, QuickBooks Proadvisor