By Xochitl Arteaga
June 1, 2023
Log… Isn’t that, like, a chopped section of a tree? It is! And that’s kind of where the term originated. Before the days when we had gauges to determine speed, sailors threw a log attached to a knotted rope overboard. The number of knots that passed through their hands in a certain amount of time determined the ship’s speed. This information was recorded to help with navigation. Later, the “log” developed into a record beyond navigation, recounting important events aboard the ship. Centuries later, the term remains! But what are mileage logs? And why is having accurate mileage logs so important? Let’s dig in.
Mileage logs are an important tool for all mobile workers. They capture business mileage, allowing employees to then submit them for reimbursement. Used correctly, mileage logs create a clear picture of personal and business usage. In the event of an audit, an accurate and compliant mileage log makes a strong case.
Unfortunately, both employees and employers often incorrectly classify business and personal mileage. This is especially true with commute miles. Many are also unfamiliar with the full range of details they must report (everything from miles driven to business purpose for each trip). These misunderstandings often result in incomplete or inaccurate paper mileage logs. Let’s look at some common areas for inaccuracies and the consequences involved with each.
Commute mileage is the distance employees drive from their homes to their regular place of work and back again. The IRS generally considers commuting costs a personal expense. This means they’re not deductible. Employers usually don’t need to (and shouldn’t) reimburse employees for their daily commute.
This is straightforward for traditional office workers. But what about mobile workers? Drivers who typically work in the field and make multiple work-related trips throughout the day? In general, the IRS considers the miles driven from their home to their first work location commute mileage. Same goes for the miles from their last work location back home. Many mobile workers are unaware of this designation. This results in drivers mistakenly reporting their first and last trips of the day as business miles to be reimbursed. Not only does this increase risk in the event of an audit, it also increases costs for employers over reimbursing employees for these miles.
Drivers make this error each day. The more drivers you have, the more the error is made. The costs quickly add up to tens of thousands of dollars wasted annually. Add on a failed IRS audit, and the costs compound through taxes and penalties.
Every business trip must be tracked and documented to substantiate mileage reimbursements. Plenty of companies collect total mileage from employees. However, the IRS requires a wide range of information that many employee mileage logs fall short of covering. To meet IRS compliance standards, the mileage, date, destination and business purpose must be recorded for every business trip. Because business travel expenses have been reported incorrectly so often in the past, the IRS now focuses on auditing these deductions in particular.
Failing to follow their guidelines completely can result in more than just an administrative headache: A California business owner’s handwritten mileage logs cost him a $5,309 deduction plus an accuracy penalty when an IRS audit found his mileage logs fell woefully short of their standards. A mobile worker in Missouri saw her $8,340 deduction for driving 18,741 miles replaced with a $2,430 deficiency that she had to pay as the result of an IRS audit. The U.S. Tax Court disallowed her mileage deduction even while admitting that she likely drove her vehicle for business use. The reason? Her daily mileage logs noted only odometer readings, not all the information the IRS requires, and did not differentiate between business, commuting and other personal miles.
When people think of vehicle programs with mileage logs, they think of mileage reimbursement and fixed and variable rate programs. Maybe an accountable allowance. People don’t think about company-provided vehicle programs. If the company owns the vehicle and covers gas costs, why record mileage?
The IRS considers personal-use a taxable benefit. For this reason, companies must charge for personal use of fleet vehicles. Most companies simply charge a flat amount across their mobile workforce each year. However, without an accurate record of personal use mileage, companies and their employees expose themselves to audit. Organizations also stand to lose money via inaccurate personal-use chargebacks.
In the past, mobile workers had to create, maintain and report detailed mileage logs by hand, for every single business trip. Fortunately, this is no longer the case. Mileage logs, like most of our business processes, have gone digital.
Instead of pen-and-paper mileage logs, employers can leverage GPS-enabled smart devices to automate employee mileage tracking and accurately differentiate their employees’ exact business, commute and personal miles. With the right mobile applications and software platform, employers are able to eliminate manual tasks in the field. The result? Increased productivity, reduced costs and IRS compliance. On top of that, employers gain insight into driving behaviors and mobile workforce efficiency.
Mileage logs are a key tool for effective mobile workforces. However, they’re only useful when they’re complete and accurate. Failing to document all the information required by the IRS—everything from miles driven to the purpose of each visit—can land company and employee in hot water. Luckily, mileage capture apps have made creating, maintaining and reporting accurate mileage logs easier than ever. Those who ditch last century’s paper mileage logs for digital options see the benefits immediately. And those who continue to wait? They risk inaccurate, costly mileage reimbursements and the ever-present threat of being unprepared in the event of an audit.
Interested in learning more about how automated mileage capture can benefit your company? Watch this video to learn more about the benefits of our app!
With Motus, accurately capturing business mileage has never been faster or easier.
Contact us today or take a virtual tour of the Motus Platform.
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