How to Calculate Mileage for Work: Strategies for Efficient Tracking and Reimbursement

When driving is an integral part of your employees’ job responsibilities, then it’s equally important that you understand how to calculate mileage for work. First and foremost, understanding how to calculate mileage for work travel is the foundation of an effective, compliant, mileage reimbursement process. Adding up the miles your employees drive to do their jobs may seem like a simple fifth-grade math equation, but this problem can quickly become complicated. 

In this article, we’ll look at the process of calculating work-related mileage, as well as the different methods, tools, and best practices for accurate tracking, and ultimately reimbursement. Learning how to optimize this practice, besides keeping your employees happy, will save your company valuable time and resources while, crucially, maintaining compliance with tax regulations.

How to Calculate Mileage for Work

When it comes to calculating mileage, you need to make sure the mileage you’re tracking is actually work-related and therefore eligible for reimbursement. In order for employee trips to be eligible, they should be related to the running of the business and the carrying out of their work duties. For this reason, commutes don’t count in the eyes of the IRS. In addition to having a work-related purpose, mileage also needs to be accurately reported to be eligible for reimbursement. 

As for the actual calculations, there are multiple different ways to add up work mileage. The first, what we might charitably refer to as the ‘old-fashioned way,’ is the classic method of recording odometer readings on the vehicle in question and subtracting the difference at the end of each trip. However, this method is rife with potential for errors. 

When calculating mileage using odometer readings, it’s impossible to know if all the reported mileage is actually work-related. There are also opportunities here for fraudulent mileage claims, whether intentional or not; after all, people generally tend to prefer working with round numbers, and employees might round up when making their calculations. Additionally, using odometer readings to calculate mileage forces employees to face one of life’s great truths: math is hard, and a lot of people aren’t very good at it! Using such a dated method to collect data leaves tons of room for human error. 

Another possible option for employers pondering how to calculate mileage for work travel is GPS. This method involves using GPS tracking to monitor employees’ movements through the workday, and calculating mileage from there. However, GPS still isn’t intuitive enough to differentiate very well between work and personal travel. 

Another possible option is seeking out mobile workforce technology for mileage tracking. Automated solutions eschew a lot of the problems that come with trying to report and track mileage manually, often allowing employees to log the distance they travel for work on a day-to-day basis, without having to perform calculations or rely on odometer readings. Getting tech involved in the process can also help prevent errors and fraud by letting management flag potentially problematic behaviors, while also using automated workflows to help avoid bottlenecks and slowdowns. 

How Are You Reimbursing?

Another thing to consider about mileage tracking and reimbursement is how your organization plans on reimbursing employees for work travel. The IRS offers two main methods: The actual expenses method, and the standard mileage rate method. How you track and calculate mileage is contingent on the method you choose. 

In the actual expenses method, employees are required to add up all money spent operating the vehicle they use for their work-related travel. They then multiply that figure by the percentage of the vehicle’s business use. The actual expenses method factors in costs stemming from maintenance, lease payments, gas, tires, insurance, licensing and registration fees, and vehicle depreciation. While an acceptable way of tracking mileage, the actual expenses method is one many find unwieldy.

The other, more straightforward option, is the standard mileage rate method. When using this option, employees track their business mileage and then multiply this number by the standard mileage rate, which is set by the IRS each year. 

While much simpler than forcing employees to track all of their vehicle ownership costs and calculate their rate of business vs. personal car use, this method does require that your company and employees keep and maintain accurate records to consistently follow the IRS mileage log requirements. These requirements state that all mileage logs, regardless of what format is used to keep them, must include the number of miles driven by an employee, the destination, the date and time of the trip, and what business purpose the trip served. 

The IRS rate is, in most cases, optional, and you may decide that your business wants to determine a mileage rate for itself. Some automated mileage reimbursement options may offer a way to easily do this. To get a better understanding of what you should set your reimbursement rate at, try out our mileage rate calculator, which allows you to calculate a rate based on the price of gas in your area. 

Keep in mind that if you use a rate that is higher than the IRS rate, reimbursement payments will only be tax deductible up to their rate, and the excess will be considered wages. Likewise, setting a reimbursement rate that is too low could result in you violating the Fair Labor Standards Act (FLSA) if an employee is making close to minimum wage. 

Make Mileage Tracking Simple with SureMileage

Trying to figure out how to calculate mileage for work travel can get complicated. Luckily, CompanyMileage was designed to make the process as easy and streamlined as possible, while still remaining customizable in order to meet the unique needs of your business. With our suite of apps for reimbursement and expense management, it only takes employees a few minutes each day to organize and then submit their work trips for reimbursement, saving workers time and energy. Plus, our software integrates directly with your organization’s payroll or accounting systems, making reimbursement even easier!

CompanyMileage customers can save up to 30% on their mileage reimbursement expenses, simply by having a reliable method of calculating work mileage and processing reimbursement claims. Intrigued? Contact us today for a demo to learn more!