Creating a Compliant Mileage Log for IRS Purposes

In today’s increasingly remote, adaptable workforce, mobile employees are a huge component of many businesses, from healthcare workers to technicians to independent contractors. And for many of those businesses, many mobile employees means many miles traveled that need to be tracked in a mileage log for IRS purposes.

If your business has mobile employees, keeping a mileage log for taxes is a vital part of tracking your business-related expenses. However, as an employer, it’s equally important that you ensure that each employee’s mileage log is compliant and consistent with the IRS’s requirements. This will maximize your deductions, and help head off any issues during a surprise IRS audit. Let’s break down the requirements for what’s expected of a mileage log for IRS requirements, and the best ways to make sure those requirements get met.

The Key Elements of a Compliant Mileage Log for IRS Purposes

What Counts? 

So what exactly is the IRS looking for from your mileage logs? First, let’s figure out what kind of travel is actually eligible for reimbursement, and therefore necessary to log. The IRS states that mileage can be reimbursed when employees travel to get from one place to another as part of their business or profession, to visit clients or customers, to attend meetings for business purposes, or from their home to a temporary workplace when they have one or more regular workspaces. Commutes, however – the travel from an employee’s home to one or more regular places of business – are not going to be eligible for reimbursement.

Whose Mileage Is It, Anyway?

The importance of maintaining an accurate mileage log is to prove the validity of mileage expense reimbursements on business taxes. When employees use their vehicles for work-related purposes, there are generally two ways to calculate mileage for later reimbursement. 

The actual mileage expenses method requires that employees retain all receipts and other documentation relevant to the cost of owning and operating a vehicle each year. The second method, standard mileage deduction, just requires that employees maintain a log of the number of miles driven in their vehicle. Most businesses tend to opt for the latter, as it simply calls for employees to log their own mileage so you, their employer, can reimburse the at the stand IRS mileage rate. 

What’s In a Log?

If you’re keeping a mileage log for IRS purposes, your log must be able to prove the amount of miles driven for each business-related trip, the date and time each trip took place, the destination for each trip, and the business-related purpose for traveling to this destination. The IRS also prefers these logs be timely, so mileage should be logged at or near the time of the trip, although weekly updates are generally considered good enough.

When it actually comes to how your log is kept, though, that’s more or less up to you. Paper, account book, digital mileage tracker spreadsheets, PDFS – the IRS doesn’t police the format, so long as the right information is present and accounted for. This begs the question, though: With the wide world of formats available to you, what’s actually the best way to log your employees’ mileage?

The Best Way to Create a Consistent And Compliant Mileage Log

Listen, let’s get this out of the way right now. Paper is great. It’s certainly been around long enough. Spreadsheets are good, too. Easy to use, easy to reference. But when it’s time to make sure you have the cleanest, most compliant mileage logs around, it might be time to look into more advanced options. Automating your reimbursement and mileage logging process can offer a number of advantages to your business. 

Consistency

If your organization has multiple mobile employees, that’s a lot of mileage to keep track of, which means a lot of logs. With so many moving parts, wouldn’t it be easier if they were all in the same place? By utilizing a technological solution for tracking and logging employee mileage, you know that employees’ logs will always be consistent, because they’re all using the exact same resource and keeping their information in the same place. Centralizing mileage information in this way also makes it harder to lose data in the shuffle.

Accuracy

Accuracy is one of the IRS’s biggest requirements for keeping a compliant mileage log for IRS purposes. Error-ridden or inadequately detailed logs could make your records ineligible for reimbursement, and, like it or not, people are prone to making thoughtless errors. By automating your mileage logging process, you ensure that mistakes get caught before they become an issue, without having to painstakingly comb through records looking for errors yourself. 

The best mileage tracking solution for your business can notify management or supervisors when employees exceed daily per diems. Some tech can even flag certain behaviors, like submitting duplicate expense reports, and notify supervisors when this behavior occurs. 

Efficiency

You’re busy. Your employees are busy. There’s lots to do! And if you’re using physical paper logs, or manual entry databases like spreadsheets, that’s a lot of time spent painstakingly collecting and recording data, not to mention the amount of time you have to take to receive, check, and approve logs. Automating mileage logs for IRS purposes also means automating expense report workflows. Avoid backlogs, pileups, and turnarounds by using tech that recognizes when a step in the mileage reimbursement process is completed, and moves things to the next step for you.

Prove a Trail

Even if you keep the most perfect, accurate, pristine mileage logs in the world, you still never know when the threat of an audit will rear its ugly head. The IRS has, as outlined above, very strict rules around travel expenses, and if you don’t abide by the IRS accountable plan and maintain accurate records, all company reimbursements will be taxes as wages. 

To avoid the IRS’s ire, it’s vital that you always be able to approve an audit trail. This could be difficult to manage manually, but digital mileage logging solutions let employees submit expense reports for approval in a way that allows management and administration total visibility throughout the process. Plus, with all necessary information conveniently located in the same app or program, it’s a lot harder for any information you might need for your audit to get lost in the shuffle!

Make a Compliant Mileage Log for IRS Purposes with CompanyMileage

Even if you follow IRS mileage log requirements perfectly, it’s still a daunting task to oversee hundreds of mileage logs, and almost impossible to catch every error or instance of inflated mileage numbers. That’s exactly why CompanyMileage created SureMileage. Unlike traditional mileage reimbursement methods, SureMilage calculates the exact amount of mileage to reimburse based on the employee’s starting and ending points in their travels. Our automated mileage tracking prevents inconsistencies in mileage reports, and our point-to-point reimbursement also eliminates travel that is disallowed by the IRS, like side trips.

SureMileage makes expense report submission easy and straightforward, automates the approval process, and can even integrate seamlessly with your business’s preexisting accounting systems. In addition to reducing the margin for fraud and errors, our software also gives employees an easy and accurate way to log mileage, and saves time by helping reduce processes that could take hours to simple tasks that can be completed in a few minutes each day.

So what are you waiting for? Find out how to optimize and simplify the mileage reimbursement logging process by contacting CompanyMileage and requesting a demo today!