If you had to make a list of things essential to your business, how long would it be? What would be on it? More likely than not, business travel makes that list. It certainly accounts for a considerable portion of the budget. While it varies from business to business, company mileage can certainly add up. One reason for that is inaccurate mileage reimbursement. So how can you increase company mileage accuracy? Let’s start by acknowledging what’s going wrong.
Many companies who reimburse employees for the business use of their personal vehicles use a mileage reimbursement. Also referred to as a cents-per-mile (CPM) reimbursement program, this requires employees fill out mileage logs that they then submit to their employers. The employer will then provide them with a reimbursement, generally at the IRS mileage standard rate.
Each year, the IRS announces next year’s IRS mileage standard. This rate takes into account the costs of vehicle ownership. Prior to the TCJA, employees could use this rate to deduct company mileage from their personal taxes. As that is no longer an option, employees must depend on their employers for a fair reimbursement.
The IRS mileage standard also serves as a threshold. Companies can reimburse their employees up to the IRS rate for each mile traveled without that reimbursement being considered taxable income. If a company reimburses above the IRS rate it’s considered additional income and is taxable.
Companies may see the newly announced mileage rate and establish it as the reimbursement rate for the following year. However, this is not what the IRS rate was established for. In fact, most companies reimbursing at the standard mileage rate are over-reimbursing their employees.
What’s more, too many companies are depending on unreliable and inefficient manual mileage logs. This form of tracking company mileage often exposes companies to mileage fraud and potential IRS audit.
First, following the IRS mileage rate generally means over reimbursing. Companies should establish mileage reimbursements that consider the regional differences in the costs of vehicle ownership. Arriving at the right number may not be simple for a business that doesn’t have expertise in vehicle reimbursement.
Second, businesses can save employees time and remove the risk of mileage fraud and IRS audit with automated mileage tracking. Using a mileage tracking app, employees can enter the appropriate information, set it to go and let the software do the rest. End users can then easily submit digital receipts from wherever they are.
Figuring out what to do next can be difficult. Luckily, we’re the experts. We’ve done this for thousands of customers. This case study is just one example. Interested in learning more about how our team can help your business reduce company mileage and travel costs overall? Connect with us to find out.