While travel expense software has made the recording and submitting of business mileage and other employee expenses dramatically more efficient, it hasn’t had that same impact on some employees. A few still fail to file claims in a timely manner, or try to debate the definition of the word timely. Employers are left to wonder how forcefully they can push the issue or if they can set time limits on submissions for reimbursement.
When it comes to business mileage reimbursement, employers don’t have to make up deadlines and no one has to blame the travel expense software. The IRS is the arbiter and here’s why.
Business mileage allowances are not taxable when they are made as part of what the Internal Revenue Service considers an accountable plan. An accountable plan requires the expenses reimbursed to have a business connection, any excess reimbursement to be returned within a reasonable period of time, and that employees adequately account for the expenses “within a reasonable period of time.”
So what is reasonable? The IRS spells it out for employees in Publication 463, Travel, Entertainment, Gift, and Car Expenses.
“… Regardless of the facts and circumstances of your situation, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time.
- You receive an advance within 30 days of the time you have an expense.
- You adequately account for your expenses within 60 days after they were paid or incurred.
- You return any excess reimbursement within 120 days after the expense was paid or incurred.
- You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.”
Sixty days. What could be clearer? But how can employers make sure this deadline is met and everyone involved remains reasonable?
First, they need clear policies that are carefully articulated to employees. Second, they need to automate the travel expense process wherever possible. Third, they should choose travel expense software that not only speeds processes but helps employees and protects employers.
Most travel expense software is based on employee-submitted odometer readings and is unable to exclude from the reimbursement equation home commutes, mileage overestimates, side trips and out-and-out fraud.
SureMileage, from CompanyMileage, uses a different approach to calculating mileage reimbursement, focusing not on travel claimed but on travel needed. Employees enter each planned trip’s starting point and destination into SureMileage and the system calculates the driving distance between them. So rather than verifying miles driven, SureMileage calculates expenses to be reimbursed.
A recent study found that SureMileage clients saved more than $18 million in a single year through the elimination of home commutes and the use of the shortest distance between locations.
There’s no doubt travel expense software saves time and money. But behind it need to be clear policies and best practices. And when it comes to setting policies on the timeliness of expense reports, look no further for guidance than the IRS.