CRA vehicle audits are on the rise. Here's what you need to know.

If Canada Revenue Agency (CRA) audits your vehicle expenses, they will ask for documentation on gas, maintenance, insurance, leasing/financing, and a mileage log. Keeping track of your receipts is fairly straightforward but the real challenge is the mileage log.

Where to start? Here are five tips for maintaining mileage records that support your claim.

• Know which trips are eligible. Driving to visit clients, attend business meetings, collecting supplies for your business are examples of generally accepted business driving. Regular trips from home to office are considered personal commuting and cannot be included. If you are unsure, please check with your accountant.
• Record the right information. A mileage log is a record of all your business driving showing where you drove from, where you drove to, the distance in kilometers, and the reason for your trip. It also shows your total driving for the year. From this information, personal versus business driving can be determined.
• Create an accurate mileage log. A mileage log can be as simple as keeping a book in your car and taking handwritten notes regarding your start and end points, number of kilometers driven, and the reason for the trip. Excel spreadsheets are also a great tool for tracking mileage. Google Maps can be used to determine distance on past trips but must be recorded manually in the log book. Quick tip: If you service your car at the beginning of each year, it makes it easy to track your total annual mileage.
• Establish a baseline to minimize recordkeeping. CRA allows a simplified method for keeping a log book. Step one is to keep track of your mileage for one year to determine a base percentage of business versus personal driving. Step two is to keep track of your mileage for any three month period in the following year. If your business usage is within 10% of the base year, you can stop tracking your mileage. You begin a new mileage log only if your business driving habits change significantly.
• Be aware of car ownership requirements. If you use a car owned by your corporation, you may be required to report a personal benefit on your T4. Check with your professional accountant to see if this applies to you.

If in doubt, review the Canada Revenue Agency guidelines on motor vehicle records or consult your professional consultant to see how the rules apply to your situation.

Loren Nancke is a tax and accounting firm with deep roots—over 30 years in Western Canada—and an innovative approach to serving individuals and small businesses in BC and Alberta. Learn more about our tax consulting and accounting services for business owners.