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How GPS Tracking Helps With IRS Audits

By February 1, 2019January 19th, 2022Blog Posts, Business & Team Management, Security & Safety

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

How-gps-tracking-helps-with-irs-auditsLet’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.