A Smarter Way to Manage Commuting Miles Vs Business Miles in Home Commutes

 A lot of things have changed in the last five years—in the world at large and in the world of business. For one thing, AI is now a ubiquitous presence in our daily lives. For another, the rise of remote and hybrid work across many industries, such as home health care, has blurred the lines between personal and business travel. As a result, differentiating commuting miles vs business miles can make managing mileage reimbursement a lot more complicated than it used to be. 

Because of the gray areas created by this brave new world, many organizations are reimbursing employees for miles traveled in their personal vehicles, without realizing that some of that mileage may actually constitute home-to-work travel, and thus, is not reimbursable. 

Is your business one of these organizations? Developing a better understanding of commuting miles vs business miles and using that understanding to reexamine commuting policies now may help avoid unnecessary reimbursement costs in the future. Better commute travel management will also facilitate compliance with Internal Revenue Service regulations around mileage reimbursement. And it’s always a good idea to be on the right side of the IRS. 

What Counts as a Commute Under IRS Guidelines

So, looking at commuting miles vs business miles as they pertain to reimbursement, what’s the difference? According to the IRS, commutes between an employee’s home and their regular place of work are a personal expense, and therefore non-deductible. They also define a regular place of work as any place from which an employee regularly performs their business-related services, even if that location isn’t permanent. 

This rule for commuting stays in effect even if an employee makes the trip outside normal hours, or for a short visit. However, a few exceptions to this do apply.

• The mileage may be eligible for reimbursement if an employee travels from their home to a temporary work location, and that location is outside where that employee normally works and lives.
• Travel may qualify as business mileage if the employee travels between two work locations, such as between their home office (if it qualifies) and a client site. (However, travel from home to an employee’s first work site of the day usually falls under commuting mileage.) 
• If an employee’s home qualifies as their principal place of business under IRS rules, travel from their home to another work site may be deductible. 

How Remote and Hybrid Work Changes the Definition of “Commute”

For hybrid employees, their home may not automatically qualify as their primary business location unless a few specific criteria are met:

• The space must be used exclusively for business, not business and personal use—the kitchen table isn’t going to count.
• This space must also be used on a regular basis.
• The employee must use their home office space to perform substantial administrative or management tasks. 
• The above tasks must be performed primarily at home. 
• If the employer provides a regular office or location from which the employee is expected to conduct their work-related tasks, that employee’s home office typically won’t qualify as their principal place of business. 

These criteria are pretty strict, too! Even occasional visits to an office location from home can trigger commuting status for that location, as dictated by the IRS. Before an employer decides to reimburse a hybrid mobile worker’s travel from home, they must carefully assess that employee’s work pattern, to avoid misclassifying that income. 

Why Commuting Reimbursements Can Trigger Tax Consequences

Clearly, IRS rules around commuting miles vs business miles can get pretty tricky—and no business wants to use the words ‘IRS’ and ‘tricky’ in the same sentence. 

Mileage must fall within the guidelines for an IRS accountable plan to stay exempt from withholding taxes or W-2 reporting. Accountable mileage must be business-related, and tracked and recorded in a timely and accurate fashion. Additionally, any dispensed reimbursements that are in excess of actual accrued business mileage must be returned to the employer within a specified timeframe. 

Commuting mileage, of course, is not accountable mileage. So if a company reimburses an employee or employees for their home-to-work commute, that payment may qualify as taxable income for that employee. If that happens, and that discrepancy isn’t caught by the company or by the worker, there could be consequences! Failure to properly classify reimbursements could result in underreported wages—and payroll tax liabilities for the employer. 

Common Misconceptions About Home Commute Reimbursement

To keep that from happening, let’s clear up some misunderstandings about commuting miles vs business miles. Some organizations, for example, mistakenly believe that if an employee works remotely, every trip they take counts as business travel, even if it should technically be considered commuting (i.e: personal, non-reimbursable) mileage. 

Some organizations believe that when it comes to reimbursement, hybrid work creates a sort of “floating office,” but the IRS isn’t one of those organizations. As we established above, the IRS has fixed guidelines for what counts a business location, requiring regular patterns of work, and a “floating office” model doesn’t quite cut it. 

Businesses that don’t realize this or misunderstand IRS regulations around mileage and business locations are in danger of finding themselves at the edge of a slippery slope. Employers often don’t realize that paying remote employees—especially field workers—for their personal commutes is establishing precedent, and that they risk tax exposure if they continue to manage reimbursements improperly. 

Establish a Clear Commuting Policy

Keep your business and your employees away from this precarious edge and in the safe territory of accountable, IRS-compliant mileage reimbursement by establishing and enforcing clear policies around commutes for remote and hybrid workers. This policy should be written in simple, understandable language, and kept accessible for employees to use as a resource if they have questions or need clarification.

In this policy, define which locations are considered permanent work sites, as well as under what conditions travel to and from these sites is reimbursable. Be sure to distinguish between what constitutes commuting travel, reimbursable travel between job sites, and travel to and from temporary assignments. 

Additionally, communicate to employees that these rules are non-negotiable. Whether or not travel is reimbursable or tax-deductible is decided by rules established by the IRS, not by company preference, and it’s not up for debate. 

Reducing Reimbursement Waste Through Policy and Tools

Clearly defining and communicating commutes is a good way for employers to avoid dispensing unnecessary reimbursements, but a great way to facilitate this is by utilizing the proper tools for employee mileage reimbursement. Some organizations manage their reimbursement processes with manual workflows and tracking methods, like mileage spreadsheets or worksheets, but to really ensure that everything stays accurate, efficient, and IRS-compliant, it might be time to consider moving out of the stone age. 

Companies that implement digital tools for smart tracking, automated processes and clearer communication typically see a sharp decline in overreported mileage. This decrease can be attributed both to more intuitive methods of calculating mileage and to better oversight of employee reporting, which makes it a lot harder for reimbursement requests for ineligible mileage to slip by unnoticed.

Proactive policy enforcement using these digital reimbursement systems benefits employers by boosting accuracy, increasing efficiency, and reducing operational costs. It benefits employees by requiring less manual mileage tracking and recording, and safeguarding faster, more accurate reimbursement payments. And it benefits everybody by protecting them from unintended tax burdens. 

As time marches on, business trends shift, and work arrangements change, companies should regularly revisit policy language around commuting, and update those policies or redefine terminology accordingly. Keeping a compliant but flexible approach to reimbursement policies helps future-proof your organization against reimbursement and payroll risks. 

Manage Mileage Reimbursement the Right Way

Better home commute control starts with the right digital tools for managing employee mileage reimbursement for (actual) work-related travel. CompanyMileage is ready to provide those tools, with its suite of software solutions for tracking, logging, and reimbursing work-related travel.  

SureMileage, our automated reimbursement software, eschews the need for manual logs and unwieldy mileage calculations, instead utilizing a unique point-to-point method or tracking mileage. The software requires employees to enter the start and end points of their work trips, and uses those points to calculate the best route for reimbursement. 

SureMileage ensures easy, accurate tracking, while eliminating the possibility that personal travel and other ineligible mileage will make its way into employee expense reports. And to help companies manage home commutes even more precisely, our system automatically tracks the distance between an employee’s home and their designated office. If a trip begins or ends at home, SureMileage deducts the standard commuting distance—ensuring only reimbursable miles are counted. 

Just in case, SureMileage gives supervisors access to auditable, up-to-date employee trip data, with options for setting daily per diems and automatically flagging potentially problematic behaviors for further analysis and review. 

SureMobile, our mobile app, makes the reimbursement process even easier for your busy mobile or hybrid employees. Wherever they are, employees can log trip data right from their phones—and with our QuickCapture feature, with the literal touch of a button. At the end of their workday, they just have to take a few minutes to organize their trips, submit relevant photos or receipts, and submit. 

Once submitted, those expense reports move through an automatic, customizable approval workflow. Our systems even integrate with all major account and payroll software, guaranteeing fast and accurate reimbursement payments. 

CompanyMileage is ready to help you manage and control headaches around understanding and reimbursing commuting miles vs business miles—and we can even save your company money in the process. To learn more about how, schedule a demo with us today!