How GPS Tracking Helps With IRS Audits | ClearPathGPS

How GPS Tracking Can Save Your A%% When the IRS Comes Knocking


Let’s talk about every business’s favorite subject: The Internal Revenue Service.

We at ClearPathGPS have been surprised by how many companies that sign up for our vehicle tracking service tell us that our solution has helped them out—and in some cases, saved their ass(ets)—during nerve-racking IRS inquiries and even full-blown audits.

The more we’ve thought about what our system does, the more sense our customers’ thank you calls after they’ve been audited make. Here’s why.

As you probably know, IRS agents don’t only go after modern-day Al Capones and businesses that just-plain refuse to pay their taxes. The agency also takes a “random lottery” approach to companies who haven’t done anything shady—like yours.

As you’ve probably also heard (or learned firsthand), the IRS takes a particular interest in vehicle-based companies, because they log so many miles–often across state lines. Of course, the IRS wants to make sure that both it and any relevant state taxation agencies are getting paid all of the taxes they’re owed for fuel and driver hours worked.

So if the IRS pulls up your file, even if you’ve never done anything wrong, it still might decide to take a microscope to your tax returns. What will you do then?

Well, if you’ve got ClearPathGPS trackers installed on your trucks and trailers, here’s how you can protect your company from some of the most difficult challenges the IRS likes to make against fleet-based companies like yours.

4 Ways GPS Tracking Helps With IRS Audits

1. Automated IFTA audit report generation.

Under the International Fuel Tax Agreement, all licensed business vehicles subject to IFTA taxation are required to maintain records that, according to IFTA’s Procedures Manual:

Shall be adequate to enable the base jurisdiction [read: the IRS or a state tax agency] to verify the distances traveled and fuel purchased by the licensee for the period under the audit and to evaluate the accuracy of the licensee’s distance and fuel accounting systems for its fleet.”

The IRS could demand to see proof of your fleet’s total miles driven in a given year, the number of miles driven in each state, the location of any of your vehicles at any given period during that year, and possibly even the specific route of any vehicle’s travel.

If the IRS asks for this information and your company doesn’t have detailed records of all of it—even if you haven’t done anything wrong—this could create real problems for your business.

But with ClearPathGPS, you automatically track all of this data on all of your vehicles (including any trailers or assets with GPS trackers), so you have proof of the information you’ve provided on your tax returns.

2. Mileage tracking and recording.

Unless you have your drivers log their miles for every trip, or someone at your company takes readings of each of your vehicles’ odometers at the start and end of every trip (and possibly even photos, for evidence), chances are you will have to estimate on your fleet’s total mileage when preparing your taxes.

But of course that won’t satisfy a curious IRS agent in your office, asking for a full accounting of where each of your drivers traveled during the tax year in question, and a detailed breakdown of your vehicles’ miles logged for every day that year.

Luckily, when you’ve got ClearPath GPS trackers installed on your fleet, we’ll be automatically logging and recording that info for your company—and making it available to you anytime online through your ClearPathGPS dashboard.

Take that, nosy IRS agent!

3. Timecard logging and verification.

Here’s another area where the tax auditors like to catch businesses. As you know, it’s not easy keeping perfect records of your drivers’ hours worked, because they’re out in the field and tracking the moment they begin and end their “work day” isn’t always clear-cut.

But when you’ve rolled out the ClearPathGPS system, you will be tracking your vehicles’ movements at all times, and our system will be effectively generating a virtual timecard of each of your driver’s movements.

Many of our customers use these virtual timecards as a way to simplify billing and reduce needlessly overpaying field service techs who “over-estimate” their hours now and then. But they can also come in handy when the IRS comes knocking and wants to know if you’ve been “under-estimating” the number of hours your drivers worked during the tax year in question.

4. Geofence reports verifying vehicle locations.

A final hot-button area that auditors like to dig into with vehicle-based businesses is when, where, and how often their vehicles drove over state lines. Remember that IFTA aims to help reconcile the tax bills that businesses might owe to the various state tax agencies for the miles their vehicles traveled through each of those states.

If the IRS demands to know not only how many miles one of your trucks drove in a given year, but also how many of those miles it drove in each state, what documentation will you be able to produce?

With ClearPathGPS, you will have not only GPS tracking to track a vehicle’s location in real-time while it’s on the road, but also geofencing capability—to prove that it was in fact within a given geographical area for a specific period. Your data can come in quite handy if any IRS agent demands you prove that one of your trucks did not cross a state line during a specific timeframe.

Protecting Your Company from the IRS: One More Reason to Sign Up for Vehicle Tracking
(As if you needed another.)

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No contracts, cancel or suspend any vehicle at anytime. Flexible hardware purchase or lease options with service plans starting at $20 per month. See why thousands have chosen ClearPathGPS.

But Wait…There’s More!

GPS Tracking Hardware, Software and Dash Cams Qualify for a Section 179 GPS Deduction

Still on the fence about installing GPS trackers on your company’s vehicles and other assets? Uncle Sam is giving you one more reason to pull the trigger this year.

For the 2019 tax year, the IRS depreciation deduction is once again a cool million, plus a 100% bonus first-year depreciation, thanks to the Tax Cuts and Jobs Act. In other words, they’re practically begging you to make a few more business equipment purchases for some pretty killer tax savings.

In case you’re unfamiliar with Section 179 of the tax code…

The IRS now allows businesses to write off 100% of business equipment and software purchases in the year they buy it. You no longer have to spread that depreciation out over many years, writing off just a small percentage in any given tax year. Under Section 179, you can reap all of that cash savings this year.

The rule applies to any type of business equipment: vehicles, machines, computers, furniture, personal property for business use, and software.

Tax Deduction Info on www.Section179.Org!

GPS Tracking Hardware and Software Qualifies for the Section 179 Deduction

As long as you purchase or lease a GPS vehicle tracking or dash cam solution by December 31, 2019 (assuming you’re still under the $1,000,000 write-off limit), you can write off the entire amount of the software and hardware on your 2019 tax return. That includes:

  • Your GPS trackers for vehicles
  • Your GPS trackers for trailers, containers, and other mobile assets
  • Your GPS trackers for heavy equipment
  • Dash cams for your trucks
  • Your telematics tracking software license

Explore Pricing Now

Lock in Your 2019 Tax Deduction Before December 31

As you can imagine, writing off 100% of a business equipment purchase such as a GPS tracking solution or dash cameras for your fleet could mean a 35% cash savings or more, depending on your company’s income tax situation.

But you’ve got to get this purchase on the books before December 31 to qualify for the 100% depreciation deduction this tax year.

If you wait until New Year’s Eve and the ball drops… you’ve dropped the ball.

All of which is our way of saying, you’re out of excuses for putting this thing off.
It’s time to start protecting your fleet with GPS tracking.

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Think You’d Be Prepared for an IFTA Audit Tomorrow?

It’s One More Reason to Track Your Trucks

First, the bad news.

If you operate a fleet-based business with vehicles regulated under the International Fuel Tax Agreement (IFTA), you need to be aware of these two unsettling facts.

1. According to its “Best Practices Audit Guide,” which IFTA publishes to help its member jurisdictions perform more effective audits on the businesses they regulate, each IFTA jurisdiction “must complete IFTA audits of an average of 3% per year of the accounts reported by that jurisdiction.”

2. The official IFTA Procedures Manual states that “in an IFTA audit, the burden of proof is on the licensee.”

In other words, your business has a small but real chance each year of being hit with an IFTA audit, even if you’ve never given any tax agency any trouble. Worse, according to IFTA’s own rules, once they decide to audit your company, you’ll have to prove your tax reporting is accurate if you want to avoid fines and penalties.

The Proof You’ll Need During an IFTA Audit

As if that weren’t concerning enough, consider that the quarterly IFTA filings can be some of the most complex, time-consuming, and difficult types of tax reports to prepare, because there is just so much data to keep track of.

For example, Section P540 of the IFTA Procedures Manual requires a business to maintain complete and accurate Distance Records that “substantially document the fleet’s operations and contain the following elements….”

the beginning and ending dates of the trip to which the records pertain

the origin and destination of the trip

the route of travel

the beginning and ending reading from the odometer, hubodometer, engine control module (ECM), or any similar device for the trip

the total distance of the trip

the distance traveled in each jurisdiction during the trip .035 the vehicle identification number or vehicle unit number

Keep in mind that IFTA’s regulators demand this level of record detail for every trip, taken by every vehicle in your fleet, on any given day of the quarter or year in question. That means your company will need to maintain:

  • Detailed mileage and state-travel records on every truck in your fleet
  • Aggregate mileage, state-travel and fuel-tax data on your entire fleet
  • Aggregate mileage, state-travel and fuel-tax data on any sub-fleets within your fleet
  • Time- or location-based mileage or tax reports for any requested time period
  • Accurate measurement conversions (from miles to kilometers, from gallons to liters) for the time your drivers have spent in Canada, which is also part of IFTA.

How Will You Keep Track of it All?

IFTA has been described by many fleet-based companies as an administrative nightmare (not to mention other terms we can’t publish here).

That’s because if you try to track and record all of this data manually—checking odometers every shift or demanding your drivers keep paper logs, recording every route in a spreadsheet, etc.—IFTA record-keeping can become one of your team’s most time-consuming ongoing tasks.

Fortunately, as more fleet-dependent businesses are learning every day, that’s not the only way to handle your IFTA reporting. We promised you good news, right?

The Good News: GPS Tracking Does Most of this IFTA Audit Stuff Automatically

The good news is that you don’t have to make IFTA reporting a manual task. You can turn all of this data tracking and reporting over to your vehicle’s GPS tracking software—assuming you’re working with the right GPS fleet tracking company.

Because your fleet tracking system can do all of the heavy lifting we discussed above, it can help make your company’s IFTA compliance:

  • Paper-free
  • Spreadsheet-free
  • Error-free
  • …and headache-free!

Learn how GPS fleet tracking can automate your IFTA audit reporting.

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No contracts, cancel or suspend any vehicle at anytime. Flexible hardware purchase or lease options with service plans starting at $20 per month. See why thousands have chosen ClearPathGPS.