What Is an Acceptable Mileage Log for IRS Purposes?

It has rarely been the case that business takes place solely within the walls of an office. That has only become more true as the years have changed. Whether all day or only part, it’s expected that by 2024 almost 60% of the workforce will do some work-related driving. If you’re like many employers, who prefer to avoid the high cost of owning a fleet of vehicles, this means reimbursing employees who use their car for work-related driving. Reimbursements can be calculated in various ways. Either by paying for each actual car expense (such as gas, insurance, tires, registration, depreciation, etc.) or using the standard mileage rate, which takes various car expenses into account. Doing this isn’t without challenges, and a major one is ensuring your employees maintain an acceptable mileage log for IRS purposes. 

The money spent reimbursing employees for travel cannot be deducted from its taxes without sufficient records. However, as with most tax-related things, knowing what the IRS does and does not find acceptable isn’t always straightforward. Do I use paper or digital? Do they need to record an odometer reading before and after each trip? How long do my employees and I need to keep the records? These questions and others are sure to be asked while making your accountable plan. While every industry may have different legal or process requirements, we can help walk you through what is and isn’t considered an acceptable mileage log for IRS purposes.

What Information Makes an Acceptable Mileage Log for IRS Records?

Not generally known for their trusting nature, the IRS will require proof to support your deductions. How exactly this looks will vary but, at the minimum, the IRS will be looking for at least three things from your mileage logs:

1. Purpose: The IRS wants to see that the trip was made for business purposes. Including the destination and reason for the journey will demonstrate their business need.
2. Accuracy: Only the miles driven for business purposes should be reimbursed; therefore, only those miles can be deducted from your business taxes. Ensure that the miles your employees’ document in the log is accurate to avoid future problems.
3. Timeliness: For the IRS to accept them, the miles must be logged by you or your employee soon after the trip has been completed. While sooner is better, updating your records weekly will suffice.

Having an acceptable mileage log for IRS purposes that reflects this information and providing supporting documentation like receipts from purchases will help make receiving these deductions simple.

Is There a Required Format to Follow?

The IRS isn’t strict on how you or your employees record their mileage. Because of this, part of creating an accountable plan is deciding on how you want your employees to log the miles they drive for work. Do you prefer they use a paper log that they fill out once a week? Is there a spreadsheet template that you want them to use? Do you want them to utilize an app to help with accuracy and efficiency? The IRS accepts all of these, but finding a solution that fits your business’s needs and training employees on using it properly will help keep your information accurate.

How Often Is An Odometer Reading Required?

Although many people assume an odometer reading is required at the start and end of each trip, the truth is that the IRS has no such requirement. Instead, they need your employees and yourself to provide an accurate record of the miles they’ve driven for each trip. Because the IRS will only reimburse business expenses, your employees will have to keep an accurate accounting of the miles they drive for personal reasons and those they drive for work. There are numerous options for tracking the mileage that will be an acceptable mileage log for IRS uses. Using the odometer is one way to estimate this, but a mileage tracking app may help save on costs. Find the option that works best for your business.

What Are the Rules for Record Retention?

Filing taxes for your business can sometimes be a long and arduous process. While having an acceptable mileage log for IRS officials to refer to can help make filing simpler, you will want to keep the records on file in case they’re needed in the future. After an employee has submitted the expense and been reimbursed, they generally do not need to keep a record of it. It is your responsibility to keep a record of the transaction for at least three years.

Is There an Easier Way to Do It?

It may fall on your employees’ shoulders to track their own mileage, but it’s in your best interest that their reporting is accurate. Despite hours of training and the best intentions, employees will inevitably make mistakes. These avoidable errors add up and cost your business money, whether through overestimating their mileage, inaccurate odometer readings, or not recording trips in a timely manner. Using software like SureMileage by CompanyMileage can help eliminate these errors.

SureMileage by CompanyMileage makes reimbursing employees a straightforward process for both you and your employees. For your employees, logging their miles becomes a simple process. Rather than rely on possibly inaccurate odometer readings, the automated mileage tracking system calculates the driving distance between the two points. All an employee has to do is report their starting and ending locations. 

As an employer, SureMileage can help reduce the risks you face when reimbursing employees. Using our automated mileage tracking prevents inconsistencies while point-to-point reimbursement removes the risk of paying for travel that isn’t allowed by the IRS, such as personal travel or side trips. With easy-to-use approval tools and seamless integration with nearly seventy different payroll and accounting programs, SureMileage aims to minimize the time involved with your reimbursement process, allowing you and your employees to focus on what’s important.

SureMileage gives companies a secured and organized system to manage their reimbursements and offers employees an easy way to log mileage. Request a demo with us today if you want to cut through the red tape and simplify the reimbursement processes.