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Compliance

Breaking Down the IRS Mileage Log Requirements

The mobile workforce is fast growing in the US, especially in healthcare. These nurses, caregivers and other in-home healthcare providers visit patients where they feel most comfortable. Whether they’re providing

October 22, 2020 — 6 min read

The mobile workforce is fast growing in the US, especially in healthcare. These nurses, caregivers and other in-home healthcare providers visit patients where they feel most comfortable. Whether they’re providing hospice care, physical therapy, assistance with daily chores or outpatient care, the jobs these unique healthcare workers do is by no means easy. 

Compared to the daily rigors of the job, keeping a mileage log may seem like a low priority, but as an employer, it’s your responsibility to help your employees understand the importance of making this practice part of their daily routines. When you consistently follow the IRS mileage log requirements, it will benefit your company and your employees. 

The Importance of Maintaining a Mileage Log

To put it simply, the importance of a mileage log is to help you prove the validity of mileage expense reimbursements on your business taxes. When your employees use their own vehicles for work-related travel, there are two ways this mileage can be calculated for the purpose of issuing reimbursement. 

  1. Actual mileage expenses: This requires that employees retain all receipts and other relevant documentation related to cost of owning and operating a car each year. 
  2. Standard mileage deduction: This only requires that employees maintain a log of business mileage driven in their vehicle. 

Obviously, most businesses find the standard mileage deduction option to be the much easier choice. This method simply calls for each employee to record all of the miles they drove in their own vehicles for you. Then you can reimburse them at the IRS standard mileage rate. This rate changes every year based on an analysis that determines the average cost of owning a vehicle in the US for that year. 

If you decide not to have your employees keep a mileage log, you’re missing out on potential savings. Most businesses who require employees to drive their own vehicles for their jobs reimburse employees for this travel (or at least, they should). If this mileage isn’t accurately tracked and documented, then any reimbursement you give them won’t meet the standards of an Accountable Plan and these payments will be viewed as wages by the IRS. Wages, as we’re sure you’re very aware, are taxable, but reimbursement payments are not. 

Keeping a log is also the most acceptable way to record business travel. While there are some instances where other evidence may be allowed, the IRS considers written evidence more reliable than oral evidence, especially contemporaneous written evidence. However, in the age of technology, a written record can be prepared on a computer or similar device and meet IRS mileage log requirements. 

How to Keep a Good Mileage Log

Eligible Travel

First, let’s define what kind of travel is eligible for reimbursement and should be logged. According to the IRS, mileage can be reimbursed when:

  1. Getting from one workplace to another in the course of your business or profession,
  2. Visiting clients or customers,
  3. Going to a business meeting away from your regular workplace,
  4. And getting from your home to a temporary workplace when you have one or more regular places of work.

Generally, anything considered a commute – traveling from home to one or more regular places of business – are not eligible for reimbursement. 

General Best Practices

When you keep a mileage log, it’s important to be exact in your recordings. Estimations and approximations will not pass muster. It needs to become a habit to just record the odometer reading before you leave and after you arrive at a destination.

Exactly how you keep a record of your business mileage is up for some interpretation. You can keep evidence contained in an account book, diary, log, statement of expense, trip sheets or similar record. The configuration isn’t as important as ensuring that the records are contemporaneous and that necessary information has been included. 

IRS Mileage Log Requirements

Your mileage log must be able to prove:

  1. The amount: the number of miles driven for each business-related trip. 
  2. The time: the date and time you take each trip.
  3. The place: the destination for each business-related trip.
  4. The business purpose: the business-related reason for traveling to this location.

Therefore, each entry in a mileage log should include the date, the destination, the business purpose, the odometer reading at the start and end of travel and the total mileage for each trip. 

Storing Mileage Records

Typically, if your employees are giving you their mileage logs for the purpose of reimbursement, then they don’t need to worry about keeping a copy for themselves. Employers, on the other hand, must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Usually, this means you should be keeping them for three years after you file taxes for that year. If you lose them and the IRS comes knocking to inquire about the reimbursements you paid out, you won’t be able to prove these payments weren’t income. 

The Easiest Way to Keep a Mileage Log?

Even when all employees follow the IRS mileage log requirements, it’s still a system rife with inaccuracies and lacking in accountability. When you have hundreds of employees, it’s simply impossible to catch every instance of non work-related travel or inflated mileage numbers. 

That’s why CompanyMileage created SureMileage. Rather than relying on the total miles driven, SureMileage by CompanyMileage calculates the exact mileage to be reimbursed from point A to point B. Employees simply report their starting and ending points, and the system calculates the driving distance between them. Automated mileage tracking prevents reporting inconsistencies. Point-to-point reimbursement also eliminates IRS-disallowed travel such as side trips from the reimbursement equation.

SureMileage ensures businesses have an organized, secure system for managing reimbursements and employees have an easy, accurate way to log mileage. In many cases, it only takes a few minutes each day for each worker. CompanyMileage helps employers save big – as much as 20-30% – on their mileage reimbursement expenses. So, what are you still doing filling out mileage logs by hand? Request a demo with us today to learn just how much easier mileage tracking and reimbursement can be!

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