IRS Approved Mileage Logs: The Benefits of Compliance

IRS approved mileage logs are an essential piece of most vehicle programs. In fact, without them, many vehicle programs wouldn’t function. What makes them so essential? And what conditions does a mileage log have to meet to be IRS approved? In this blog, we’ll cover all that and more. 

What’s a Mileage Log? 

We’re going to start off with the basics by answering a fairly simple question: what’s a mileage log? A mileage log is an employee’s record of their business trips. These are essential in programs where businesses reimburse employees for the business use of their personal vehicles. Without a mileage log, employers won’t know how much is owed. 

What makes a mileage log IRS approved? 

Submitting mileage isn’t as simple as recording your odometer at the start and end of the business day. IRS approved mileage logs are required for each trip in a day. To meet the conditions, each log must include: 

• Start and end location 
• Date 
• Miles 
• Business purpose 

If any of those essential pieces are missing, the mileage log is not considered IRS compliant. 

Benefits of IRS Approved Mileage Logs 

There are considerable benefits to using IRS approved mileage logs. Most of those benefits come in the form of mitigation. In a busy world, removing concerns before they become burdens is an easy priority. The benefits of IRS approved mileage logs include audit mitigation, tax waste mitigation and employee engagement. 

Audit Mitigation

When employees don’t submit IRS approved mileage logs, they expose themselves to audit risk. This, in turn, exposes the business they work for. The audit of an employee isn’t great. Expanding that across the company and its mobile workforce? Companies are better off ensuring they are IRS compliant.  

While IRS approved mileage logs are essentials of mileage reimbursement, fixed and variable rate (FAVR) reimbursement and accountable allowance programs, they also have their place in fleet programs. When an employee receives a company car they can drive for personal use, the IRS views that as a taxable benefit. Mobile workers with fleet vehicles might not have to record their business trips, but they are required to record their personal ones. Failure to do so may expose them to audit as well.  

Tax Waste Mitigation 

The IRS is attentive to what should and should not be taxed as a benefit. One of the easiest ways to avoid tax waste is reimbursing employees at or below the annual IRS mileage rate. However, some employers like the convenience of the car allowance program. The company simply provides driving employees with a monthly stipend for the business use of their personal vehicle. The issue with the car allowance is the allowance is not tied to the business miles mobile workers drive, meaning the IRS views each allowance as “additional income” and taxes it as such. 

Companies with car allowance programs can implement accountable plans to cutdown on tax waste. With an accountable plan, employees capture their mileage in IRS approved mileage logs. Tied to business mileage, their stipend is then tax-free up to the IRS mileage rate. 

Methods of Mileage Capture 

There are two methods of capturing business mileage: manually and through an app. While writing things down might seem foolproof, the manual method can be a source of serious burden for companies. Automating mileage capture, on the other hand, provides more solutions. Let’s take a look at how they differ. 

Manual Mileage Capture

Manual mileage capture is as basic as it gets. Employees record the necessary information on what they have on them: a notebook, a receipt, a napkin. This method takes time out of the driving employee’s day, writing information for each trip. It can also take considerable time on the administrative end. When an employee submits their mileage, someone has to review it and approve it for reimbursement. If an employee forgets to add crucial information, it may not make the cut of IRS approved mileage logs. It also exposes the company to potential mileage fraud. 

Mileage Fraud 

Let’s say an employee drives from point A to point B for a total of 17 miles. Looking at their odometer, they see the difference between the actual mileage is a mere 3 miles. So they round up to a nice flat 20. That’s mileage fraud. It may not seem like much. With 2024’s IRS rate of 67 cents per mile, their actual trip should be reimbursed at $11.39, while their rounded-up trip is $13.40. However, if this rounding up persists beyond one trip to every trip over the course of the year? That adds up. And if multiple employees are using the same technique? It can get expensive, fast.  

Automated Mileage Capture 

Automated mileage capture makes logging business miles easy. With the right vendor, driving employees simply open their app to start a trip. Once they’ve logged their miles, they can add the business purpose and conveniently submit it from anywhere. These mileage logs guarantee accuracy that won’t be as consistent when done manually. That means no more mileage fraud. The right app should also guarantee IRS approved mileage logs. That’s less time, less effort and better accuracy. 

Making the Most of IRS Approved Mileage Logs 

Logging business mileage is essential to most vehicle programs. Making sure those mileage logs meet IRS compliance standards is just as essential. It means mitigating audit risk and reducing tax waste. What’s more, by automating the mileage capture process, companies can control costs and boost productivity while decreasing administration and mileage fraud. Interested in seeing what makes a good mileage capture app? Tour the Motus app today!

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