The mileage tracking feature in QuickBooks tracks only the miles you drive using company vehicles, not other vehicle expenses, such as fuel or tolls. Likewise, you don’t use QuickBooks mileage tracking to record miles driven by employees, vendors, or subcontractors, which instead go straight to an expense account. For example, if a vendor bills you for mileage, when you enter the bill in QuickBooks, you assign that charge to an expense account, such as Travel-Mileage. When you write a check to reimburse an employee for mileage driven, you assign that reimbursement to the expense account for mileage.
Adding a Vehicle
To track mileage for a company vehicle, you first have to add the vehicle to the QuickBooks Vehicle List. Here’s how:
- To open the Vehicle List window, choose Lists→Customer & Vendor Profile Lists→Vehicle List. The Vehicle List window opens.
- To add a new vehicle, press Ctrl+N or click Vehicle→New. The New Vehicle dialog box opens.
QuickBooks doesn’t want to know much about company vehicles. All you have to do is give the vehicle a name. You can add any details you want in the Description box. After you click OK, the vehicle takes its place in the Vehicle List (shown in the background).
- In the Vehicle field, type a name for the vehicle. To easily identify your company cars and trucks, include the type of vehicle and a way to differentiate it from others. For instance, if your company’s cars are all white Jeeps, use the license plate number as the name rather than make and color.
- In the Description box, type additional info such as the year, make, model, license plate number, or Vehicle Identification Number (VIN). To change this information later, in the Vehicle List window, double-click the vehicle’s name, and then, in the Edit Vehicle dialog box, edit the name or description.
- Click OK.
That’s it. The name and description appear in the Vehicle List window.
Setting the Mileage Rate
For tax purposes, you can deduct mileage expenses based on a standard rate or by tracking the actual costs of operating and maintaining your vehicles. Using a standard mileage rate is convenient—simply multiply the miles you drove by the rate to calculate your vehicle deduction.
If you own an expensive car with expensive maintenance needs, actual costs might provide a larger deduction. (You can deduct either the standard-rate amount or your actual costs, but not both.) But to deduct what you spend on gas, tires, repairs, insurance, and so on, you have to keep track of these expenses. As usual, the tax rules for deducting operating and maintenance costs are, well, taxing. So before you choose this approach, ask your accountant or the IRS if you can deduct actual costs and whether it’s the best approach.
QuickBooks stores multiple mileage rates along with their effective dates, because standard mileage rates usually change at the beginning of each calendar year. Here’s how you set a mileage rate:
- Choose Company→Enter Vehicle Mileage. The Enter Vehicle Mileage dialog box opens.
- In the dialog box’s toolbar, click Mileage Rates. QuickBooks opens the Mileage Rates window shown below.
QuickBooks displays the standard mileage rates with the most recent rate at the top and older rates below it.
- To add a new rate, click the first blank Effective Date cell, and then choose the date that the new mileage rate becomes effective, such as 1/1/2010. You can type the date or click the Calendar icon.
- In the Rate cell, type the rate in dollars and cents, such as .50 for 50 cents. The mileage rate is .50 per mile beginning January 1, 2010 as documented on the IRS website.
- Click Close when you’re done.
Recording Mileage Driven
Once you’ve added a vehicle to the Vehicle List, you’re ready to record mileage. (You don’t have to set the mileage rates to record the miles you drive, but you’ll need that rate in place before you bill a customer for mileage.) Here’s how you fill in the Enter Vehicle Mileage window to record billable and nonbillable miles you’ve driven:
- Open the Enter Vehicle Mileage window (choose Company→Enter Vehicle Mileage). In the Vehicle box, choose the vehicle that you drove. If you forgot to add the vehicle to the list, you can create it now by choosing <Add New> from the drop-down menu.
- In the Trip Start Date and Trip End Date boxes, choose when you started and completed the trip, respectively. If you’re recording mileage for one day of onsite work, choose the same day in both boxes. On the other hand, if you used a company car to drive to another city for several days, the Trip Start Date is the day you headed out of town and the Trip End Date is the day you returned.
- In the Odometer Start box and Odometer End boxes, type what the vehicle’s mileage was before you began driving and what it was when you returned, respectively as shown below. QuickBooks automatically calculates the miles you drove and plops that number in the Total Miles box. You can also fill in the Total Miles box with the miles you drove.
If you usually forget to check the starting mileage, you can ignore the Odometer Start and Odometer End boxes entirely. Instead, in the Total Miles box, type the mileage you drove, such as 72 for a 72-mile round-trip to your customer. You can type the mileage with or without commas (1,500 or 1500). The drawback to this approach is that your mileage record doesn’t include the odometer readings that the IRS wants to see. But if every mile you drive is for business, you can prove your deduction by showing the IRS an odometer reading at the beginning of the year and one at the end of the year.
- If your mileage is billable to a customer or job, turn on the Billable checkbox. Then, in the Customer:Job box, choose the customer or job to whom you want to assign the mileage. If the mileage isn’t billable to a customer, choose the faux customer you created to track time spent on administrative activities.
- In the Item drop-down list, choose the item you created for mileage. For tips on creating an item for mileage, see the box on Mileage Rates and Invoice Items.
- If you track classes, in the Class box, choose the appropriate one. For example, if you use classes to track branch performance, choose the class for the branch. However, if you track partner income with classes and the mileage is nonbillable, you don’t need a class assignment.
- To further document the reason for the mileage, type details in the Notes box. Then, to save the mileage and close the dialog box, click Save & Close. If you want to enter additional mileage for other customers and jobs, click Save & New.
What if the IRS’s rate is different than the rate I charge customers for mileage?
The rates you enter in the Mileage Rates dialog box are the standard rates set by the IRS for tax purposes. The IRS doesn’t care one whit what you charge your customers for miles, so you can charge them whatever you want.
For the reimbursable miles that you drive, you need to create a Service or Other Charge item in your Item List. (In the Enter Vehicle Mileage window, the Item drop-down list includes only these two types of items.) When you create the item, you can assign the rate that you charge customers per mile or leave the rate at zero if you charge variable mileage rates.
For an Other Charge item, the “Amount or %” box is the place to enter the mileage rate, as shown below. (For a Service type item, use the Rate box instead.) In the Account box, choose the income account you use for reimbursable mileage, whether it’s specific to mileage or an overall reimbursable cost account.
When you create an item for mileage, you can enter whatever rate per mile you want. When you add the mileage to an invoice, QuickBooks multiplies the number of billable miles driven by the rate you set in the mileage item.
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