Company Mileage Reimbursement – Explained

April 7, 2021

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 everyday chores than game-changing moves.

Duties that often needed 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 Company 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.

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

Free Mileage Reimbursement Policy

The following professions can be eligible for Mileage Reimbursement:

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

Mileage rate includes

  • 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 depends in part on whether you have an accountable plan. 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.

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

Free Mileage Reimbursement Policy

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 of time.
  • Employees must return any excess reimbursement or allowance within a reasonable period of time.

An employee must provide proof that the business expense is valid:

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

The Internal Revenue Service (IRS) has announced the 2021 Business Mileage Standard Rate of 56 cents, down 1.5 cents from the rate for 2020. This applies to miles driven starting January 1, 2021.

Make sure your employees record their trips accurately and timely while creating their Mileage log.

With the MileageWise Mileage Tracker App, they can easily track their trips and refuelings on the go. The AdWise 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 the User Management functionality. 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 examines 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

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About the blog

I have been blogging for my readers since 2005, primarily about mileage logs and related subjects: about our software development, customer service, and sales experience. I am happy to share my opinion in a humorous manner on the great things in life - if necessary with a firm stance on the subject -, sharing my own raw thoughts.

"I write original content. I'm not copying others."

Akos Barazsy
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