What Should Your Mileage Rate Actually Be?
Determine an estimated mileage rate based on gas prices in your area.
Estimated Mileage Rate Based on Today’s Costs to Own and Operate a Vehicle
Figures are based on an internal analysis by CompanyMileage.
2022 IRS Mileage Rate by cost (% & $)
Sometimes math, like death and taxes, is unavoidable. For many businesses, it’s crucial to maintain accurate mileage reimbursement calculations, both for the sake of the employees they’re reimbursing and for the business itself. After all, when your organization accurately calculates reimbursement payments for the right trips at the right rate, not only will your employees be fairly compensated for their work mileage, these reimbursements will also be tax deductible.
With the stakes so high, your organization may want to be on the lookout for a tool suited for calculating mileage reimbursement in a way that automates mileage tracking, figures out reimbursement amounts based on accurate existing data, and ensures compliance with IRS regulations. The good news is, such a resource exists! In this article, we’ll discuss how using a mileage reimbursement calculator can help your business simplify reimbursement, minimize errors, and help efficiency within your organization.
Why Should You Utilize a Mileage Reimbursement Calculator?
There are two parts to calculating mileage reimbursement: the reimbursement rate and the mileage itself.
Let’s Talk Rates
Every year, the IRS updates its standard mileage rate, based on an annual study of fixed and variable costs of operating a motor vehicle. These costs include fuel, maintenance, registration and license fees, insurance, and the biggest cost: depreciation.
The IRS rate for 2023 is 65.5 cents/mile. However, (with a few notable exceptions) businesses are not actually required to use the IRS standard mileage rate. If your organization chooses not to use the IRS rate, it’s important that you choose a rate that does not exceed the IRS rate, but is still sufficient to cover employees’ vehicle operating costs. In this instance, a mileage reimbursement calculator, such as this one which helps you determine your ideal rate based on local fuel prices, can be used to help you determine the best rate for your business.
More Mileage, More Problems
Once you’ve determined what rate you want to use, you have to determine the actual mileage the rate will be multiplied by. Although it may sound like a no-brainer, the mileage value can actually be a deceptively difficult number to find.
Employees are required, for the sake of reimbursement, to track their business mileage, but what exactly does that mean? For one thing, all mileage traveled must be traveled as part of the employee in question’s work duties. Work-related travel entails mileage accrued by employees traveling from one place to another as part of their profession, to visit customers or clients, to attend business-related meetings, or from their residence to a temporary workplace (when the employee has one or more regular workspaces). Side trips not taken for any business purpose cannot be calculated. Nor can an employee’s commute from their home to their workplace.
In order to maintain compliance with IRS requirements for an accountable plan, meaning that reimbursements won’t be subject to withholding taxes or W-2 reporting, the IRS requires that employees keep a mileage log. This log must be able to prove the number of work-related miles driven for business-related trips as well as the time and date of each trip, the destination, and the trip’s purpose. Each employee must also add up their trip mileage through the pay period, whether that be daily, weekly, or biweekly. The sum of their trip mileage should then be multiplied by the reimbursement rate you’ve chosen to use to calculate the reimbursement payment.
Employing a Mileage Reimbursement Calculator
Once you understand the components of mileage calculation, the question remains: What benefits can you see from using a mileage reimbursement calculator as part of an automated mileage reimbursement strategy within your business? Well, one big plus is the automation itself. Using a system that calculates the best and most accurate mileage rate for your area, and using that rate to automatically calculate mileage cuts out the middleman – which, in this case, is the opportunity for human error. After all, using point-to-point calculation eliminates the need for employees to have to tally mileage themselves by subtracting odometer readings from their work-related trips.
Automating mileage tracking means eliminating most manual processes. Not only does this reduce administrative burden on employees and supervisors, it also allows for more accurate data entry and calculations. This increase in efficiency and chance of error reduction also means your mileage logs will be better compliant with IRS guidelines, better helping your company abide by the IRS’s accountable plan.
Using automated systems like a mileage reimbursement calculator also will help your organization improve expense reporting, and better streamline reimbursement workflow. This will ensure that all employees eligible for mileage reimbursement receive reimbursement payments in a timely manner, and in accurate amounts.
Keep It Moving With CompanyMileage
Sometimes mileage reimbursement calculations can feel like a real chore, but luckily CompanyMileage’s suite of mileage reimbursement solutions—SureMileage, SureMobile, and SureExpense—were designed to take the headaches out of the process. With CompanyMileage’s automated, digital software solution to mileage reimbursement calculations, you don’t have to worry about adding up trip mileage, subtracting odometer calculations, or manually multiplying the rate to calculate reimbursement.
Instead, use our mileage rate calculator to determine what rate makes the most sense for your business based on fuel prices in your area. Then, input whatever rate you choose into our system, which uses a unique point-to-point calculation system to determine employee mileage. All employees need to do is log the start and end point of each work-related trip they take, and our software will do the rest!
Employees spend as little as two minutes a day organizing and submitting trip mileage for reimbursement, significantly reducing the amount of time they were dedicating to this task before using SureMobile. And once submitted, it’s easy for supervisors and managers to review and approve trip mileage so reimbursements can be paid out in a timely manner.
Not only will automating mileage reimbursement calculations with SureMileage save your employees and supervisors time and energy, but it’ll save you money as well! CompanyMileage customers can save up to 30% on mileage reimbursement expenses. To find out more about how we can help you save, contact us today for a free demo!