Company Mileage Reimbursement – Explained

Last updated on: October 18, 2023

Small business owners and entrepreneurs alike often find themselves in the situation of having too much on their plate. That is usually a good thing, as it means their business is gradually expanding. There comes a time when they have to start outsourcing tasks that are, of course, necessary, but they are more like everyday chores than game-changing moves.

Duties that often need to be outsourced are usually the ones that take up too much productive time but are mostly related to the everyday maintenance of a business.

They can be:

  • Driving to buy office supplies
  • Driving to the bank or post office
  • Running business errands
  • Driving to meetings or gatherings
  • Delivering orders or documents to customers

If all the tasks mentioned above are done by employees using their personal vehicles, an employer can offer mileage reimbursement for the miles that they have driven for business purposes.

What is Mileage Reimbursement?

Mileage reimbursement is when an employer compensates an employee for the work-related miles they drive in their personal vehicle. The reimbursement rate, payment terms, and details of the process all depend on the agreement between the employer and the employee.

The following professions can be eligible for mileage reimbursement:

  • Government employees
  • Salespersons
  • Personal company drivers
  • Taxi drivers
  • Au pairs or nannies

What does the Standard Mileage Rate include?

  • Gas/Fuel, Oil;
  • Car Insurance;
  • Parking fees;
  • Maintenance costs;
  • Other personal vehicle-related costs – depreciation, etc.

If you are an employer and you reimburse employee business expenses, how you treat this reimbursement on your employee’s Form W-2 partly depends on whether you have an accountable plan or not.

Reimbursements treated as paid under an accountable plan, as explained next, aren’t reported as pay. Thus this is a tax reduction opportunity both for you as an employer and your employees.

For an employer’s reimbursement or allowance arrangement to be categorized as an Accountable Plan it must include all of the following rules:

  • Employees’ expenses must have a business connection—that is, they must have paid or incurred deductible expenses while performing services as an employee of their employer.
  • Employees must adequately account to their employer for these expenses within a reasonable period.
  • Employees must return any excess reimbursement or allowance within a reasonable period.

An employee must prove:

  • The amount spent;
  • The date it happened;
  • The place where it happened;
  • The business purpose of the expense.

The Internal Revenue Service (IRS) 2023 business mileage standard rate is 65.5 cents, up 3 cents from the rate of 2022’s Q3 & Q4.

Make sure your employees record their trips accurately and timely while creating their mileage log. However, if they didn’t keep a mileage log for a certain period in the past but had Location History turned on in their Google account, they can convert their trips recorded by Google into an IRS-approved mileage log.

With MileageWise’s Mileage Tracker App, they can easily track their 1000+ trips/month and refuelings on the go. Our AI Wizard feature will make an IRS-proof mileage log recommendation for them by taking into account all the legal regulations about mileage logging and tax return policies. This technology will create a mileage log, which will correspond to the exact mileage your employees have driven according to their odometer.

Managers can assign permissions to certain operations in the Web Dashboard with the help of our User Management feature. Managers can add employees to access their MileageWise account and record data, as well as create mileage logs.
For multiple users managers can set which employees can work with which vehicle, which employees can record and modify a particular vehicle’s monthly trips data, pair vehicles with clients, or set up recurring daily trips.

In the process the built-in IRS auditor checks and corrects 70 logical conflicts with a smart algorithm ensuring that your mileage log will be IRS-Proof, meeting every expectation.

If you don’t have a Mileage Reimbursement Policy yet, download it by clicking on the button below:

Free Mileage Reimbursement Policy

If you’d like to see what MileageWise has to offer for your mileage reimbursement:

Try MileageWise For Mileage Reimbursement