If you have employees driving on the job, it’s essential to ensure you’re following all of the IRS mileage requirements. While this seems like a simple enough task, there are quite a few IRS regulations regarding employee travel and mileage reimbursement that your business should be aware of if you want to stay on the right side of the law. This article will explain the basics of what counts and doesn’t count as mileage, and how to ensure that your employees are reimbursed adequately according to IRS guidelines so you don’t have to pay any penalties at tax time.
Am I Required to Reimburse Mileage?
The short answer is no. Federal laws do not require you to reimburse your employees for business mileage. In fact, only three states (California, Illinois, and Massachusetts) have laws requiring organizations to reimburse employees for using their personal vehicles for business. However, there are many benefits to implementing a mileage reimbursement program for your employees.
One significant benefit is the effect it has on your employees. Employees need to be treated well and have their contractual wage maintained, which can’t be guaranteed when company expenditures erode their income. When this is the case, employees are more likely to feel that they are unappreciated and disrespected by the company. Implementing an efficient mileage reimbursement is a fantastic way to ensure employees feel fairly treated and compensated.
Furthermore, if company expenditures—such as those incurred while driving a personal vehicle for work—erode employee income to the point that it technically falls below the federal minimum wage, you could be in violation of the Fair Labor Standards Act (FLSA). So, if your employees’ wages are already close to the federal minimum, it’s beneficial for both them and your business to implement a mileage reimbursement program.
What Counts As Business Mileage?
While the IRS mileage reimbursement requirements are pretty straightforward and relatively simple to follow, it’s important to know what does and doesn’t count as business use of a personal vehicle. There are many different types of work travel that will affect your mileage reimbursement. Commutes, errands, and site visits all have their own set of rules for what counts as business travel and what doesn’t. Let’s look at some different types of trips and whether or not they would be considered business mileage.
The IRS considers commuting miles and business miles as two distinct types of mileage. Commuting miles are the miles that an individual travels from their home to their workplace and back. Because commuting miles are considered personal mileage in most cases, they aren’t tax deductible. There are some exceptions, such as traveling from home to a temporary work site or traveling from a home office to a regular place of business, but in general, the IRS sees commuting mileage as the purview of the individual, not the employee.
Employers may compensate their employees for driving long commutes to work, though the Internal Revenue Service (IRS) doesn’t offer deductions for commuting miles. If an employer chooses to reimburse employees for the miles they commute, they won’t be able to claim those miles on their taxes.
Almost every worker who has to drive for their job, whether between job sites or the bank, has been tempted to take a short detour to knock out a few personal errands. While this may not seem like a big issue—after all, it may only be a few miles out of your way—as far as the IRS is concerned, it is. To meet the IRS mileage requirements, errands can only be counted if they are business related. If they aren’t business errands, they won’t be deductible and shouldn’t be logged.
For companies that have multiple locations or job sites, employees will occasionally have to travel between different places. If your employees travel to various sites for business reasons, it’s essential to know that those miles are deductible. This means that you’ll want to have your employees track any miles they drive to visit worksites so that they can be reimbursed.
What Are the IRS Mileage Requirements?
Though there aren’t many hard and fast IRS mileage requirements for reimbursing employees, the IRS is strict about what is and is not deductible. For most cases, a deduction can only be claimed if the taxpayer has a log of their miles and expenses. This means your employees will need to ensure that they account for every mile driven on behalf of your company as well as vital information about each trip. Tracking this information can be done using the traditional method of keeping a paper log or using software to get more accurate information.
What Information Needs to Be Included?
For your records to meet the IRS mileage requirements, you’ll want to ensure that your employees keep proper records with a logbook. There are several methods for logging mileage, but whichever method you choose should include this information:
- Trip mileage
- Time and/or date
- Trip start point and destination
- The purpose of the trip
- Total annual mileage
Whether you decide to go with the traditional method and use a paper trip log or want a system that is more straightforward, reliable and accurate, like a mileage tracking app, all of this information must be included when you file your taxes. If your records do not include the required information and documentation, the IRS may decide to do an audit.
Meet Every Requirement With SureMileage
In today’s world, business can happen anywhere. As an employer, you have a responsibility to ensure your employees keep an accurate mileage trip log. In the past, this meant providing your employee with a paper logbook and reviewing it with a fine-tooth comb for any mistakes or inaccuracies. In contrast to traditional mileage reimbursement systems, SureMileage calculates the exact amount of mileage to be reimbursed based on the employee’s starting and ending points. Automating mileage tracking reduces reporting inconsistencies, and our point-to-point reimbursement eliminates IRS-disallowed travel like side trips.
With SureMileage, businesses also have an organized, secure system for managing reimbursements, and employees will have an easy and accurate way to log mileage. Because SureMileage makes expense report submission such a straightforward and easy process, manages the approval process, and integrates seamlessly with your existing accounting systems, the chances of expense report-related financial mishaps are greatly diminished. On top of helping reduce the amount of fraud and errors, by automating the reimbursement process, procedures that could take hours to complete can be done in just a few minutes each day.
Interested in seeing how CompanyMileage can help you meet all of the IRS mileage requirements? Request a demo with us today!