Not every vehicle program requires mileage logs. For companies with fleets and car allowances, capturing business mileage may seem like busy work. However, mileage logs are more than just the foundation for mileage reimbursements. Additionally, the right business mileage tracker will save the company time and money while reducing risk.
Companies with specific vehicle programs require mileage logs of each business-related trip a driving employee makes. Some employees still record these logs manually, a process that takes time and increases incidents of mileage fraud. A business mileage tracker, also referred to as a mileage tracker app, helps employees by making a digital record of their business mileage. With the right app, driving employees can capture the necessary information and submit IRS compliant mileage logs with ease from anywhere.
There are two vehicle programs where a business mileage tracker is essential: mileage reimbursement and fixed and variable rate (FAVR) reimbursement programs. However, there are also applications for a business mileage tracker in company-provided vehicle programs and car allowance programs. We’ll dive into each further.
Business mileage trackers are essential to a mileage reimbursement program from a couple simple reasons. First, employees won’t receive their reimbursements unless they submit mileage logs for their business trips. Second, as previously stated, while manually recording mileage is an option, it’s time consuming and exposes the company to mileage fraud. With the right business mileage tracker, employees can deliver IRS-compliant mileage logs with ease, and administrators don’t have to sort through barely legible notes on napkins and receipts.
While a typical mileage reimbursement can be run with manual mileage tracking, a FAVR program requires a business mileage tracker. The reasoning is simple. FAVR reimbursements are specific to each individual driving employee. With the right provider, these rates are calculated through a platform that connects business mileage trackers with the data that ensures fair and accurate mileage reimbursement. A manually-recorded process would be inefficient, taking far longer than necessary. For the convenience of both employer and employee, FAVR and business mileage trackers go hand in hand.
Plenty of companies have car allowances and don’t require their driving employees to record any business mileage. However, if the allowances aren’t tied directly to business miles, the IRS considers them additional income. That makes each monthly payment taxable. Ultimately, employers pay more and employees receive less.
Through an accountable allowance program, employees capture and submit their mileage. This substantiates the allowance amount they receive, ensuring any amount they receive, up to the IRS mileage rate, is untaxed. This also protects companies from potential mileage audit risk.
A company-provided vehicle program, also referred to as a fleet program, can’t possibly have need of a business mileage tracker, right? The company provides employees with vehicles they drive for business trips. Why would that mileage need to be recorded? Well, most companies offer their fleet vehicles as a perk to employees. And that is a taxable perk.
According to the IRS, “An employee’s personal use of an employer-owned automobile is considered a part of an employee’s taxable income…” So, what happens if the employee doesn’t keep a record of their business and personal miles? If that’s the case, “the IRS deems the use 100% personal to the employee.”
Employers can guarantee employees enjoy personal use of fleet vehicles tax free with a business mileage tracker. Employees can track their business miles and subtract personal mileage, or vice versa. Either option is more favorable than paying income taxes on the perk.
There are a lot of business mileage trackers on the market. Knowing what to look for can make all the difference. There’s a list of things every business mileage tracker should provide: IRS compliant mileage logs, reduced mileage fraud and increased visibility. The best mileage trackers offer even more. Interested in learning more about which mileage tracker app is best for your company? Check out our post “What’s the Best Mileage Tracker App for the Anywhere Workforce.”