How much do companies reimburse for mileage to mobile employees? That should be a straightforward question, right? Companies reimburse for employees’ business mileage accrued in their personal vehicle based on the amount of eligible miles traveled, calculated using a predetermined mileage rate. 

But what if the reported eligible miles aren’t accurate? Then your organization might be paying out a lot more than it should. Besides the obvious financial risks posed, mileage fraud and errors in reimbursement and reimbursement reporting could seriously challenge the integrity of your organization’s business operations. 

In this article, we’ll discuss the often-overlooked and underestimated costs and consequences of inaccuracies in mileage tracking, including common mistakes and forms of fraud, the impact on businesses and how your company can mitigate these risks as much as possible. 

Inaccurate Mileage Tracking

How much do companies reimburse for mileage? Well, if mileage tracking isn’t done correctly, the answer could be: not the amount they should be! This problem could be made worse by the fact that there are a handful of ways in which the wrong numbers could be ending up in employees’ mileage logs.

Math Mistakes

It’s a simple fact of life: when you make employees do math, they will often do it wrong. For businesses that use calculation-heavy mileage recording methods, such as using odometer readings to get mileage totals, it’s not uncommon for employees to come up with the wrong number because of some errant miscalculations.

Mileage Estimating

Mileage estimating is another form of seemingly harmless inaccurate mileage tracking. Estimating is the method in which employees, instead of recording the exact number of miles traveled, will round or estimate to the nearest round number, to make calculations and data entry easier. 

Mileage Padding

If it’s difficult or time-consuming for management and supervisors to double-check mileage totals on logs, employees might pad their mileage for greater reimbursement totals. This might include estimating up or seeking reimbursement for forms of travel that aren’t actually eligible for reimbursement, such as side trips and commuting mileage. 

Blatant Lies 

It’s not unheard of for employees to try creating entirely fraudulent logs, or to submit duplicate logs. While this is the rarest form of inaccurate mileage tracking, it can be difficult to catch bogus log submissions without the right procedures and processes in place. 

The Cost of Fraud and Errors

Taxes, Taxes, Taxes

A huge factor when considering the question “How much do companies reimburse for mileage?” is the IRS guidelines for keeping compliant mileage logs. The IRS rules for an accountable plan dictate that in order for mileage to be accountable, or nontaxable, it must meet these criteria:

  • That the mileage be business-related.
  • The mileage must have substantiation in the form of a mileage log. These logs must contain the date, time, locations, and business purpose of each trip, all information within must be accurate, and the information needs to be logged in a timely fashion.
  • If an employee is reimbursed more than what they actually incurred or spent, they must return the excess amount to their employer within a reasonable period of time. 

If these rules are not met – for example, if your mileage log is too inaccurate or inconsistent to be considered sufficient substantiation – your organization will end up having to pay taxes on what was supposed to be nontaxable payments. 

Fraud Adds Up! 

Besides the way it could impact your organization come tax season, fraudulent reimbursement claims could add up quickly! How much do companies reimburse for mileage when their workers are getting away with false or inflated reimbursement claims? More than they should!

Hypothetically, let’s say your company employs 300 mobile workers who log their mileage for reimbursement. If each of these employees were to claim they’d traveled just ten miles more than they actually did, how would that affect your company’s reimbursement payout? At the current IRS standard mileage rate of 67 cents per mile, each of those 300 employees inflating mileage totals by just ten miles adds up to a whopping $2,010. If each employee reported 50 extra miles, that adds up to a little over $10,000!

What About Other Ramifications?

Besides the extra money your organization could be reimbursing due to mileage log fraud, your business may face other ramifications for failing to address the issue of fraudulent and error-ridden logs. 

Legal and Financial Repercussions

Who’s afraid of the big bad IRS? Submitting inaccurate mileage reimbursement logs could result in legal repercussions for your organization, likely in the form of hefty fines, depending on the scope of the issue. This is because reimbursement payments are tax deductible as long as you’re following the rules of an accountable plan. If the IRS discovers mileage you reimbursed for doesn’t meet their standards, those payments to employees suddenly become taxable. 

Damaged Reputation

Your organization having a problem with inaccurate, inconsistent or fraudulent mileage reporting could result in serious hits to the company’s reputation, from both inside and out. If your organization can’t hold its own employees accountable for fair and accurate mileage logs, then they’ll only be more likely to engage in fraudulent behavior, knowing that they can and will get away with it. This kind of erosion of accountability, accuracy, and organization could lead to your organization losing serious credibility in the wider business community. 

Failure to be Audit Ready

Accurate, organized, and accessible records are crucial to the financial health of a business, in more ways than one. If the IRS approached your company today and asked to see your records, how confident are you that they wouldn’t find several inconsistencies or inaccuracies? Lackluster logs will make it difficult to prove an audit trail should the need arise, and also less likely to actually pass that audit if it does. 

Sleep Easy With CompanyMileage Managing Mileage Reimbursement

How much do companies reimburse for mileage traveled by their mobile employees? It depends on a lot of factors! But CompanyMileage’s suite of software solutions is here to make sure that fraud, errors and inaccurate mileage logs factor into that final total as little as possible. Our mileage reimbursement software, SureMileage, is designed to leave as little room for error or fraud as possible. From their smartphones, employees simply enter the starting and ending point of a trip, and SureMileage calculates the best route between those points, and from there the mileage amount for reimbursement. 

At the end of the day employees just have to organize their trips and receipts and submit them for approval, at which point reports are moved through a customizable approval workflow. Our software is also compatible with all major accounting and payroll systems, so employees can be reimbursed as quickly and accurately as possible.

Contact CompanyMileage for a demo today to find out more about how your reimbursement payments can be as error-free as possible!