For an employer, what’s the surest thing in the world? Forget death, let’s talk taxes. One of the primary issues of keeping up with on-the-go workers is that of efficiently and accurately tracking mileage for taxes. When figuring out how to track mileage for taxes, there are numerous factors to consider to ensure that your organization keeps running smoothly and efficiently without letting anything slip through the cracks. Where to start? 

Whose car is it anyway? 

In an increasingly mobilizing workforce, many employers will begin to ask themselves not whether their employees will travel for work, but how. Many employers make the mistake of overthinking the issue of transportation, and opt for company vehicle programs in the hopes of optimizing the process. This might seem like an easy solution, but before you get too far, hidden problems will start to rear their ugly heads. 

Besides large up-front costs, employers who opt for company vehicles also face long-term maintenance costs to keep these vehicles in ship-shape. Between lease payments, insurance, oil changes, fuel costs, maintaining taxes and licenses…the whole thing seems like more trouble than it’s worth! Employers also run the risk of having to deal with issues of ensuring that employees always have access to company cars, not to mention increased liability exposure should any of those employees get in wrecks. 

Which way to pay?

The better option in many cases is to opt for employee mileage reimbursement for travel in personal vehicles, which optimizes both flexibility and cost. But when you do that, there’s – say it with me – factors to consider. The first: how are you paying their travel expenses? 

Car Allowance:

There are a handful of ways a business can handle travel expenses. The first is a car allowance, a fixed amount that companies give employees to cover expenses of using their personal vehicles for work. Per diems are a similar alternative; these are a daily allowance given to individuals by their employer. Per diems eliminate the need for employees to know how to track mileage for taxes, and, like car allowances, eliminate the need for travel expense reports. While these methods have their benefits, their simplicity comes with the cost. Different employees will travel different amounts, and setting a flat rate for all of them regardless of actual mileage, besides being inexact, might make employees start to feel unequal. 

Mileage Reimbursement:

Another method is mileage reimbursement. Mileage reimbursement allows employers to reimburse their workers at a specific rate for every mile driven. This is often the preferable option for both employers and employees. The promise of reimbursement for work-related travel increases workers’ satisfaction with their jobs and can incentivize work-related travel. Plus, it eschews up-front costs for companies. 

Companies who provide mileage reimbursement will see a break during tax season, as mileage reimbursement is a deductible business expense. Helpfully, mileage reimbursement is also the most accurate way to compensate employees for their travel, but it might require a little more legwork. 

Calculating costs 

When it comes to calculating the costs of using a personal vehicle for business travel, the IRS offers two methods. 

Actual Expenses:

The Actual Expenses method requires employees to add up all money spent on operating the vehicle used for work-related travel, and then multiply that figure by the percentage of the vehicle’s business use. Costs factored into the actual expenses figure could include gas, maintenance, lease payments, insurance, tires, licensing and registration fees, and vehicle depreciation. 

Standard Mileage Rate:

The other, much more straightforward method involves using the standard mileage rate the IRS sets each year.. Instead of requiring workers to track individual purchases and costs, employees  simply need to track business mileage and multiply that number by the standard mileage rate. This method is much simpler than forcing employees to track all car ownership costs and calculate how often they use their vehicles for business vs. personal use, which is why the vast majority of businesses opt to use the standard mileage rate. However, it does require your company and employees to keep accurate records in order to consistently follow the IRS mileage log requirements. 

Time to track

If you decide using the standard mileage rate is the best choice for your business, the next step is to look at how to track mileage for taxes. The IRS has very strict rules about what needs to be included in a mileage log. Every log should include the number of miles driven, the destination, the date and time of the trip, and what purpose the trip served for the business. When setting up your process for logging mileage, it’s important that the method you select meets those requirements, while utilizing efficiency and accuracy to keep your business running smoothly. 

Paper Logs:

Until recently, paper logs were the primary method used by mobile employees looking for how to track mileage for taxes. Besides being the total opposite of high tech, paper logs are easy to use, and, if you can believe it, totally wireless. However, paper logs aren’t always the best method for maximum efficiency, and paper records are easily lost, damaged, or forgotten. And if an employee fails to log their mileage, you won’t be able to reimburse them and claim it for your taxes.

Spreadsheets:

Another popular tool for tracking mileage, spreadsheets are easy to use and customize, and they can be great for logging mileage digitally with programs like Excel and Sheets. However, logging all that travel info manually can be time-consuming. It’s also very easy to make mistakes when entering data into a spreadsheet, and it’s not always the most accessible on-the-go. 

Mileage Tracking Apps:

Mileage tracking apps help eliminate confusion on how to track mileage for taxes by letting employees log travel on their phones. An automated logging system definitely allows for ease of use, and access to a portable, digital record. But when it comes to an automated option, the tricky part is that there are so many different apps on the market that the possibilities seem endless. 

Knowing How to Track Mileage for Taxes is Simple and Efficient with CompanyMileage

When you’re wondering how to track mileage for taxes for your business, you want the best. CompanyMileage gives you access to an accurate, organized and cost-efficient system for logging employee mileage. Our mileage reimbursement software, SureMileage, reduces the risks faced when reimbursing employees thanks to automated mileage tracking and point-to-point reimbursement. 

SureMileage gets rid of the tedious calculations necessitated by traditional reimbursement methods by allowing employees to report their starting and ending points and calculating the direct driving route between them. That way only trip mileage, not overall mileage is reported, ensuring that you’re only reimbursing employees for the miles they drove for work. 

Taxes are a sure thing, and with CompanyMileage you can ensure that the accuracy of the information you provide is a sure thing too.