The Complete Guide to Business Mileage Log Management

Here’s a riddle for you: If employees are driving their own cars as part of their regular work-related travel, is it your responsibility as an employer to make sure they’re keeping a business mileage log for reimbursement?

The short answer is: yes, very much so, but there’s more to it than that. 

First, you have a responsibility to your employees. Since they can no longer claim unreimbursed mileage on their taxes, the only way they can be compensated for the use of their vehicles for work is through their employer. 

Secondly, you also have a responsibility to your business. Mileage reimbursement is tax-deductible, meaning it isn’t taxed like employee wages are. It benefits your bottom line to implement a system for reporting and reimbursing these expenses. 

In order to properly reimburse mileage, you either need to track every single car expense…or make sure each individual keeps an IRS-compliant business mileage log. These logs substantiate the business use of a vehicle to the IRS. That way, your company can write off reimbursements as business expenses so employees don’t have to pay taxes on reimbursement payments.

IRS Compliance

The IRS has its own rules concerning how businesses should keep a business mileage log for substantiating mileage expenses. For offsetting employees’ business-related expenses, the IRS distinguishes between accountable plans (tax-free reimbursement) and 

non-accountable plans (taxable compensation). 

The rules of an IRS accountable plan requires that:

• Employee expenses are business-related.
• Employee expenses are adequately accounted to their employer in a reasonable and timely fashion (usually within 90 days). 
• Any excess reimbursement must be returned to the employer within a reasonable amount of time (usually within 90 days).

In order to meet the requirements for an IRS accountable plan, you must prove that all payments to an employee constitute a reimbursement for business expenses and are not compensation. You have to show that payments don’t exceed the business expenses incurred by employees while operating a vehicle; a business mileage log is the most reliable way to do that. 

Business Mileage Log Requirements 

Each mobile employee must keep a business mileage log that is accurate and complies with IRS rules. Here are a few things to keep in mind: 

• The IRS requires that mileage be recorded in a business mileage log within a reasonable amount of time. It’s a good rule of thumb to have employees contemporaneously record their mileage at the start and end of each trip. 
• The business purpose of every expense must be stated. Personal errands, side trips, and commutes between an employee’s home and place of work are considered personal travel and not eligible for reimbursement. 
• Each business expense should include information on the date and time it occurred. For a business mileage log, the date and time should be recorded for each business trip. 
• The IRS designates the employer as the custodian of record. While it’s employees who will record their mileage, it’s up to you as their employer to save and maintain this information. In case of an audit, you should keep your records for at least three years. 

So, to recap, a business mileage log needs to include: the purpose for each trip, the starting point and the destination of each trip, the mileage at the beginning and end of each trip, the date of each trip, and the starting and ending time of each trip. The mileage log itself needs to be well organized, and employers – not employees – should be responsible for saving these records for several years after the fact. 

What Form Can a Business Mileage Log Take? 

While the IRS has plenty of rules (see above!) about the content of a business mileage log, they’re less choosy about the format logs take. Essentially, the actual methods of tracking and recording trip mileage are up to the business, as long as the resulting mileage log is compliant with IRS regulations. 

So there’s nothing stopping you from using GPS tracking methods to monitor employees’ travel and tally their mileage that way. Likewise, allowed vehicle mileage log formats include handwritten paper logs, PDFs, account books, and manually maintained digital spreadsheets.

However, just because something is allowed doesn’t mean it’s actually the most prudent, cost-effective, or efficient way of doing things. GPS tracking, while high-tech, is often overly simplified and unintuitive. And manual data entry, especially using odometer readings, has its downsides as well.

The Pitfalls of Manual Mileage Logging 

There’s a reason analog and manual-entry methods still persist in some mileage reimbursement workflows. Those methods are traditional, straightforward, and hands-on. 

They also come with a very high margin for error. 

Let’s say your business does decide to stick to the basics, requiring pen-and-paper logs using mileage calculated with odometer calculations. That won’t get you in trouble. 

But what if an employee misses a single digit in their calculations, reports a wrong number in their business mileage log, and nobody catches the error before approving? After all, administrators taking hours to sift through piles of paper for hours is not the best way to find or prevent logging mistakes. 

So that inaccurate mileage log makes it through the approval process, and the employee in question receives their  inaccurate reimbursement payment. Maybe the incorrect payment was more than the correct amount, so your business loses money on that reimbursement.

One error might not seem like the biggest deal. Mistakes happen, right? But what happens when you multiply this one error by dozens or even hundreds of mobile employees? With no mechanisms for preventing or catching errors and fraudulent behavior, your business could be losing money hand over first in inaccurate payments, without anyone even realizing.

Losing money due to logging discrepancies is bad. But when it comes time for an IRS audit and those inconsistencies see the light of day, you’ll find your company in financial, regulatory, or even legal trouble. And that’s worse. 

Introducing Automation to the Business Mileage Log Process

Before you let your business get bogged down in odometer calculations, paper logs, and disorganized spreadsheets, answer this question: Have you considered automating your business’s mileage tracking processes?  

Enter mileage reimbursement software. Software solutions for mileage logging give users the power to automate everything from distance recording to trip categorization, minimizing the need for manual data entry. Many of these apps also offer location-specific tracking, which helps keep mileage records accurate. They also take the onus of detailed record-keeping off of your busy employees by providing automated, categorized reports for both business and personal travel. 

Besides helping to keep logs accurate and organized, integrating mileage tracking tools with your organization’s accounting and payroll systems greatly streamlines the process of mileage reimbursement. This integration allows for automatic calculation of reimbursement based on an employee’s logged miles, reducing administrative workload. Crucially, it ensures that your mobile employees will be compensated for their work-related travel accurately and in a timely manner, enhancing the satisfaction and trust of your workforce. 

The Benefits of an Automated Business Mileage Log

By incorporating technology into your employees’ mileage tracking and logging methods, your organization will see the following benefits:

Real-Time Tracking

You don’t need to be breathing down your mobile employees’ necks, but when they spend so much of their workday on the road, you don’t want them feel completely unsupervised, either. 

Automated mileage tracking lets management and supervisors monitor how their employees go about their workdays and observe their movements in real time, while still giving them the space to do their jobs.

Automated Commute Deductions

It can sometimes be hard to keep eligible and ineligible travel separate for the sake of a business mileage log. Luckily, reimbursement software can automatically deduct commuting mileage, so that it stays out of employees’ logs by default.. 

Efficient Route Planning

Automating mileage tracking and the business mileage log also doubles as a way of planning and managing the best routes between destinations – a huge help for busy workers who need to balance work and travel as efficiently as possible.

Easier Payroll Experience

Mileage reimbursement processes run entirely by manpower can make approving and distributing reimbursement payments a complete slog. Manual workflows get thrown completely off course by missing documents, paperwork pileups, and bottlenecks. 

Not only does mileage reimbursement software automate the approval process, it can also integrate with payroll and accounting software. By digitizing this step in the process, employees can rest assured that they’ll receive efficient, accurate, and timely reimbursements. 

Faster Logging

Your employees have busy schedules. They should be spending their workdays doing their jobs to the best of their abilities, not having to constantly monitor and maintain an unwieldy manual business mileage log.

Recreating mileage log methods digitally lets your employees enter just the necessary information and let the software handle the rest, so they can use their precious time as efficiently as possible. 

Save Money With Improved Visibility

Optimizing mileage logging with digital methods also helps your organization save money and cut costs.

As we noted above, manual mileage logging can get expensive for businesses. There’s no accountability, no visibility, and no oversight. That can get pretty expensive. How many times has your business distributed reimbursements that included inflated mileage totals or duplicated reporting without even noticing the loss?

Automating mileage recording and tracking helps businesses cut costs because software greatly reduces the margin for error, for fraud, and for reporting non-business mileage. For one, reimbursement software reduces the need for error-prone manual data entry in each business mileage log. 

For another, automated systems can flag instances of noncompliant behavior, such as duplicated and edited entries for further review by managers or supervisors. With greater insight into employees’ logs and behaviors, organizations can feel confident that they’re reimbursing their employees for their eligible work travel – and nothing else. 

Better Recordkeeping

A digital business mileage log also helps meet the IRS requirement of keeping timely records. Unlike in many manual mileage management methods, using digitized logging, results can be recorded in as close to real time as possible. 

Digitized records also mean more accessible records, organized records. If you do face an audit by the IRS, proving an audit trail will be fast and simple. Mileage records created through the use of software can be kept in a centralized location, making them easily accessible should they ever be needed for tax records, without losing accessibility or visibility.

Crafting and Implementing Mileage Log Policies

You can’t decide to automate your reimbursement processes, digitize every business mileage log, and then rest on your laurels. Even if you find and purchase the best mileage reimbursement software out there, it’ll be worthless if you don’t communicate guide lines and expectations around mileage logs and reimbursement for your mobile workforce. 

Create and maintain clear, comprehensible, and accessible policies around expectations for mileage tracking and logging, and then communicate them clearly to all relevant employees. Define and explain everything that workers will need to know to stay compliant. That includes defining what constitutes business travel, setting standard rates for mileage reimbursement, outlining the process for business mileage log log submissions, and explaining the consequences for noncompliance. 

Regular submission cycles and a structured review process will help make sure that logs are accurate and up-to-date. Consider setting weekly or monthly submission deadlines to maintain a steady flow of submissions and prevent backlogs.

Managing a Business Mileage Log is Easy With CompanyMileage

To keep your business on track and the IRS happy, your mobile employees need the proper tools for the best possible business mileage log. CompanyMileage and our suite of automated mileage reimbursement applications was created specifically to provide those tools, so you won’t have to look far.  

Our mileage reimbursement software, SureMileage, makes business mileage log management a snap. Using a unique point-to-point calculation system, our software calculates the best route for reimbursement based on the starting and ending points of each work-related trip. 

Using this method, your workers never need to worry about adding up odometer readings or separating work and personal mileage. Instead, employees just need to report their starting locations quickly and easily on our SureMobile app on their smartphones. To ensure timely reimbursement, they simply need to take a few minutes at the end of each day to organize their trips, snap photos of any relevant receipts, and submit expense reports for review. 

Once submitted, expense reports move through an automatic, customizable workflow, where supervisors get automatically notified when their approval is needed. Our systems are also compatible with all major account and payroll software, ensuring employees will always receive reimbursement in an efficient and timely manner. 

To learn more about how CompanyMileage can save you time, trouble, and money on trav