Guide to Fleet Management and Mileage and Expense Tracking

fleet management expense tracking solution uk

Why Combine Fleet Management With A Mileage Tracker?

Today, we’re going to explore how fleet management and mileage and expense tracking solutions can help those working in fleet management operate more efficiently. In recent years, both categories have emerged, offering those running a vehicle fleet much better visibility as to how to optimise their logistics. 

Here are some common elements those in fleet management need to manage:

  • Location tracking: Where their fleet is at any given time
  • Route optimisation: Ensuring drivers are taking the shortest and most efficient route possible
  • Tax compliance: Ensuring records are accurate
  • Digital transformation: Reducing the emphasis on manual or paper-based processes
  • Fraud reduction: Ensuring that drivers are not making fraudulent claims, whether inadvertent or otherwise

Given the digital trails being left by drivers, it is now possible for companies to provide insights into the hidden cost of the above. What has emerged is that the above compounds with costs escalating significantly based on fleet size and the typical number of miles undertaken annually.

Read on to learn how the ROI on an effective fleet management and mileage and expense tracking programme far outweigh the cost.

Mileage and Expense Tracking

A mileage and expense tracking solution is an integral part of a fleet management system. Whether the company supplies a fuel card or reimburses the vehicle’s users, a mileage app will result in significant cost and time savings. After all, a mileage tracker is not just for tracking miles – it can provide an array of information to manage a fleet more efficiently.

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Advantages of a Mileage and Expense Tracker

  1. Compliance: HMRC compliance (UK) as all journeys are tracked with accurate mileage to the decimal point.
  2. Tax Management: Designed to easily identify personal trips vs. business trips, and to prevent possible benefit-in-kind administration and costs.
  3. Route Optimisation: Optimise mileage routes – fewer miles translates into cost reductions, as well as less wear and tear and CO2 emissions.
  4. Time Optimisation: More efficient planning results in better utilisation of an employee’s time, including identifying idle time.
  5. Fraud Prevention: The data available from a mileage and expense tracker makes it easier to tackle fraud as well as acting as an added incentive.
  6. Financial Reporting: You get accurate KPIs including miles per gallon and costs per journey.
  7. Driver Management: Monitor driver’s behaviour faults such as harsh acceleration, heavy braking, and speeding.
  8. Flexible: Uses Advisory Fuel Rates for employee reimbursement or deduction for private use.
  9. Expense Management: Receipts uploaded including fuel, parking, and other expenses.
  10. Administration: Reduction in administration time as numerous reports available to the fleet management and finance team including a personal trips report.

TripLog can provide a mileage tracker which can be easily added to fleet tracking software.

API and Integrations

TripLog’s powerful web API provides back-end server-to-server function calls to search, retrieve, create, and modify user data. It is available to enterprise and business users.

TripLog is integrated with industry-leading tools such as ADP Marketplace, Concur, Chrome River, Emburse, QBO, Xero, Salesforce, and Freshbooks. Drivers can also connect their bank account information and import from Google Calendar and Outlook.

Summary and Conclusion

Tracking fleets of cars and tracking those cars’ mileage is something that would make sense to go hand-in-hand, but many companies either use outdated and inaccurate methods such as pen-and-paper, or aren’t tracking mileage at all. Combining fleet management software with a full-featured mileage tracker is an easy way to save time, money, and headaches.

About Triplog

TripLog is a comprehensive mileage and expense reimbursement platform that increases employee productivity and accountability, resulting in significant cost savings to employee mileage reimbursement programs. 

With over 500,000 downloads, TripLog is trusted by Fortune 100 companies and users worldwide. In addition to its powerful mileage and expense tracking capabilities, TripLog offers employee schedule tracking and timesheets. TripLog can be downloaded on iOS or Android, or schedule a free live web demo today.

About the Author

Parteek Singh is the Director of Marketing and Business Development at TripLog. He is a data-driven decision maker with significant experience with tech startups from ideation to build out.

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Email

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How to Prevent Fraud in Business

prevent fraud in business

Falsifying expense reports, mileage fraud, and its impact on businesses of all sizes.

The Reality of Business Fraud

In a 2016 Global Fraud Study conducted by the Association of Certified Fraud Examiners, the cost of fraud recorded by participants was $6.3 billion USD. Even by their estimates, the total global cost of fraud may be significantly higher, maybe even hundreds of times higher. Fraud has serious consequences for the bottom lines of companies big and small. In this study, certified fraud examiners estimated that a typical organization loses about 5% of revenue due to fraud.

Though many situations of fraud are intentional, many employees commit fraud without even knowing. Fraud doesn’t necessarily point to criminal behavior, but it does have huge real-world consequences for organizations whether or not the fraud was deliberate. It’s important to plan for fraud and recognize it when or before it occurs. This article is about the primary ways a business can experience fraud, who commits fraud, and how to prevent fraud in business.

Who commits fraud?

Fraud can be committed by any member of an organization. Employees and managers are most likely to commit fraud, but their lack of access to larger funds in the business restricts the cost of their frauds. While owners and executives are much less likely to commit fraud (partially because employees comprise more of a typical company), the cost of their schemes is usually much higher due to their access to large amounts of money within the organization and their ability to evade or override anti-fraud prevention methods that other employees wouldn’t have access to.

About three-quarters of occupational fraud come from just seven departments: accounting, operations, sales, executives and upper management, customer service, purchasing, and finance. It isn’t much of a surprise that employees from the accounting department are most likely to commit fraud in a company. These employees have continuous access to financial statements and can easily falsify numbers along the way.

prevent fraud in business

What are the types of fraud in Business?

Though there are a wide range of types of fraud in business, there are three primary classifications in regards to occupational fraud.

There are 3 classifications for business frauds:

  1. Corruption
  2. Asset Misappropriation
  3. Financial Statement Fraud
What is Corruption Fraud?

Corruption includes conflicts of interest, bribery, illegal gratuities, and economic extortion. This type of fraud is committed by those in positions of power. Examples of corruption fraud could be purchasing or sales schemes.

What is Asset Misappropriation?

Asset misappropriation typically involves cash, inventory, or property. This type of fraud can be committed at nearly every level of an organization. This can range from stealing cash receipts to payroll schemes and mileage expense reimbursement schemes. Asset misappropriation is the most common type of fraud in business, but usually costs the least of all frauds in expenses to employers.

What is Financial Statement Fraud?

Financial statement fraud consists of under or overstating things such as revenues, asset valuations, or cheating on mileage tracking reports. This type of fraud can be committed at every level of a company. Financial statement fraud is the least common type of fraud but usually costs the most to employers.

The Most Common Types of Employee Expense Fraud and How to Prevent Them

Employees are the most likely individuals in an organization to commit fraud. These frauds are usually small amounts through expense reports, but they can occur for a period of time, which adds up in the long run.

The most common ways employees cheat on expense reports are:

  1. Submitting personal expenses as business expenses
  2. False mileage reporting
  3. Exaggerating gratuity/tips
  4. Submitting more than budgeted
  5. Receipts for canceled or returned items

Submitting personal expenses as business expenses

A simple way to commit fraud is by claiming personal expenses as business expenses. This could include meals, fuel, vacations or trips, and much, much more.

Recommendation: Require employees to submit expense reports that explain every charge with receipts.

Mileage Fraud

Another simple method of committing fraud is cheating on mileage tracking submissions. A small addition is unlikely to set off any alarm bells and may be enticing for employees.

Recommendation: Ditch the spreadsheets and use an automated mileage tracker. A GPS mileage tracking tool will give you accurate submissions every time, reducing your potential losses, cutting down the amount of employee hours spent tracking and submitting mileage, and give you peace of mind. Triplog Mileage offers a robust expense and mileage tracker app so you can rest assured your organization isn’t experiencing mileage fraud.

manage employee spending

Exaggerating Gratuity/Tips

When employees are reimbursed for meals, a simple technique to skim a little extra out of the budget is by lying about tip amounts. While the meal can be accounted for through receipts, gratuity is not always recorded. This leaves a vulnerability in the system where employees could lie about the amount given in tips to receive more in reimbursement.

Recommendation: Require employees to use a credit/debit card and request receipts for every meal. Using a card every time will ensure the transaction can be tracked, reported, and checked in case of discrepancies.

Submitting more than budgeted

When employees are given budgets to spend on various items such as meals or travel, oftentimes management doesn’t notice when employees have exceeded their allotted amounts. This can go unnoticed for a long period of time, leading to many small charges adding up to a large amount of money. This becomes difficult to fix when many charges pile up.

Recommendation: Accountants should be double-checking numbers often. Make it a requirement to review budgets frequently to make sure every employee is reporting honestly.

Additional Tips for Identifying & Preventing Fraud in Business

Tip Hotlines

According to the Association of Certified Fraud Examiners, the most common detection method for organizations experiencing fraud are tips from concerned individuals. Therefore, the single most impactful method of identifying fraud within an organization is providing an anonymous hotline to report suspicious activity to the organization.

Individuals who know about fraud may not want to come forward for various reasons, including friendships, reputation, not being taken seriously, and reprimand. Whistleblowers may even be outside the organization entirely, making tipping off anyone within more difficult. An anonymous hotline for reporting fraud removes many of the barriers to reporting and allows for more honesty in tips.

Company Debit Cards

If your organization budgets funds for employee use such as for meals or travel, a straightforward approach to preventing fraud is by providing debit cards to employees. If employees are only given the amount they are budgeted, they can’t spend more than is allotted. This also allows management to review every charge and check for discrepancies. This doesn’t necessarily control all types of fraud, but it does allow much more oversight.

Conclusion

A business will always be exposed to some risk of fraud. Humans are prone to error and could be enticed to cheat their company out of money. Every employee added to payroll is another liability to control for. That’s why Triplog Mileage offers an expense and mileage tracker app that saves you time, money, and protects your business from fraud. Automated mileage tracking and reporting cuts out any inaccuracies and helps every business run more smoothly. Download the app today to begin your journey toward more accurate expense tracking.

The IRS Mileage Rate for 2021 – What to Expect

irs mileage rate 2021 triplog

A massive financial issue that companies, employees, rideshare drives, contractors, entrepreneurs, and freelancers should be keeping an eye on, is the IRS mileage rate for 2021. While there is no published version of the said rate for 2021 yet (57.5 cents for 2020), the yearly mileage reimbursement rate comes in quite handy for organizations, as it helps them determine the best way to reimburse employees. 

Determining the mileage rate is also a great way for people to find out which mileage rate to add when filing taxes. For those who do not know, the mileage rate reimbursement rates were never supposed to be a company’s reimbursement rate by the IRS. On the contrary, they came into existence to serve the role of a cap for organizations. 

Simply said, any money given to employees over this rate essentially becomes taxable income. For steering clear of this problem, employers can recompensate around the rate per mile. For example, the rate during 2019, used to be around 58 cents for every mile. Therefore, sole proprietors would be wise to utilize the same rate whenever calculating the expenses of running small businesses, which may also include driving for a transportation company like Uber. 

Are you preparing for 2021s reimbursement rate? If the answer is yes, consider keeping the following things in mind. 

The IRS Mileage Rate for 2021

In case you do not know about the IRS mileage tracking rate, familiarizing yourself could go a long way. There is a high possibility that you know it by another name. However, the rate will essentially be the biggest amount an organization can provide its workers per mile, without paying the reimbursement’s taxes.

Determining Mileage Rates – What are the Indicators

Several indicators can help determine the right mileage rates. Let us discuss some of the most common ones that companies resort to. 

Vehicle Maintenance and Costs

After the downsizing and bankruptcy of most rental car businesses, the prices for used vehicles reduced considerably. Also, it is worth keeping in mind that the rates of used automobiles do not impact mileage rates. That said, with the low new vehicle inventory recently, the prices for used cars are slowly increasing.

This shows that the rates of new automobiles will not face a massive impact. According to some reputable valuations, the prices for new vehicles increased only by 2.5 percent during September 2020. After that, however, they remained mostly flat, which indicated supply-related challenges, among other issues. 

There is no denying that the automobile maintenance industry experienced a massive decline during the lockdown, it is slowly but surely bouncing back and may raise prices to ensure they catch back up to their growth targets. 

Insurance Rates

The seemingly everlasting increase of insurance rates is something that everyone knew would happen with the passage of time. However, things took an unexpected turn when those rates finally began to drop, for obvious reasons. 

The amount of people traveling reduced significantly. This meant that traffic would be lower, drivers would be less distracted, and there will be a smaller number of accidents. That said, the slight decrease in insurance rates will not play a massive role when deciding the mileage rate for 2021.

triplog irs mileage rate

Fuel Trends

It would be safe to say that oil experienced arguably the rockiest year compared to others. Sure, the news was not as widespread as other events, mainly because it got buried under other headlines. Nevertheless, there were several contributors that led to this rocky season, and one of them was the pandemic. It impacted the economy globally, significantly decreasing business and personal mileage. 

However, problems were brewing long before the pandemic as OPEC+ AND Russia were in a long production standoff without any clear winner. According to speculations, the reason for this standoff was to capture market shares. However, it was likely from the perspective of supply and demand. There was a lot of oil, but the need was surprisingly low. 

What’s more, business mileage activity still remains lower than the pre-pandemic levels, as we head in the fourth quarter and the same foes for fuel demands. Although the oil surplus and the pandemic were 2020s atypical assets, their impacts could carry onto 2021 and be massive determinants for the IRS mileage rates. 

There seems to be no end to the pandemic in the United States, or anywhere else for that matter. In addition, several indicators suggest that business activity may not come back to where it was before the pandemic until summer 2021. Since industries like tourism and travel have a massive impact on fuel consumption, it may take some time to match the previous year’s oil surplus. 

Predicted IRS Mileage Rates for 2021

Although we are a few months away from the official announcement, everything that happened during this year points towards a decrease. However, there is nothing to indicate whether the decrease will be minimal or substantial so far. 

Getting Ready for the IRS Mileage Rate 2021 – What Can Your Company Do

Does your organization reimburse employees? If the answer is yes, reconsidering that approach may be a wise choice for the following reasons:

  • Maintenance and fuel costs are specific to areas. Therefore, reimbursing every employee at the same rates, or giving them similar lump sums would be wasteful and quite unfair
  • The correct cents per mile reimbursements could be lesser than the IRS’ mileage rate, and that is how it should be. Why? Because the mileage rate provided by IRS is mostly there as a guide. Therefore, if you reimburse above the rate and you will have to pay taxes for the reimbursements. It would be best if you considered a mileage rate beneficial for your company and is employees
  • Using the Internal Revenue Service mileage rate for reimbursements tends to result in high reimbursements for high mileage drivers and low reimbursements for low mileage drivers. Try searching for a fair option for each employee as it may also offer effective cost control. 
  • Among every vehicle program option, the FAVR (fixed and variable rate) reimbursement could be the perfect fit as it accounts for variable and fixed vehicle costs. 

The upcoming IRS mileage tracking rate for 2021 is arguably the most anticipated one due to the events that happened in 2020. Needless to say, organizations should prepare themselves to weather the storm, making sure they can operate without too much hassle.

Section 8 – Calculating Mileage for Reimbursement

calculate mileage for reimbursement

As you probably already know, calculating mileage reimbursement is a relatively straightforward process, but it is important to understand whether or not you are qualified for the reimbursement you are trying to get. Furthermore, if you are qualified for mileage reimbursement, you must follow the guidelines that are provided in the other areas of this information hub. Along with this, you must also focus on the details of the mileage reimbursement information provided by the IRS.

Another fact that needs to be mentioned is that sometimes an employer may make the use of a completely different mileage rate than the one which has been published by the IRS. If this happens, it must be known by everyone that any reimbursement given that exceeds the IRS rate will be considered as income and hence will be taxable.

How To Use The Mileage Rate

When determining how much a reimbursement should be for the use of personal vehicles by employees, those who are self-employed, and business owners for various company or business purposes, one must make use of the IRS standard mileage rate.

Below is an example of how to properly make use of the mileage rate. In the example, one must record the fact that they have used their personal vehicle and driven 200 miles for performing a particular business activity. The standard mileage rate for 2020 was 57.5 cents per mile, so the equation that can be used is as provided below:

● reimbursement amount = miles * rate

● 200 miles * 57.5 cents = $115.00

calculate mileage with irs regulations

As another example, let’s say that you’re using the personal vehicle of your employer for a work-related purpose and have driven the same 200 miles. In such a case, since there is no standard mileage rate applied here (as you’re using the vehicle of your employer) but you’re paying the amount to operate it (for example, gas, maintenance, etc.), the mileage reimbursement rate is 21 cents per mile by the employer. The equation used will be the same, but the total reimbursement will be different.

● reimbursement amount = miles * rate

● 200 miles * 21 cents = $42.00

From the above two examples, the conclusion comes that there is a higher reimbursement amount as a result of driving one’s own vehicles for business-related activities, but operating your own vehicle will be higher comparatively.

When Using Your Vehicle For Both Business and Personal Use

When you’re using your own personal vehicles for both business or personal use purposes, it is important for you to understand the need to segregate the mileage that has been used. This allows you to know what to claim for depreciation and other costs related to operating the vehicle. Below is an example of the proper calculation. Let’s take a look at another example.

Let’s say that you’ve driven 200 miles in your vehicle for a personal trip. Within that same period, you’ve also driven a total of 100 miles for business. You can calculate the percentage of how many business miles you’ve driven by dividing the business miles by the total miles (100/300=0.33). The result is 33%, the percentage by which you can calculate the total miles of the vehicles to arrive at the amount used for business.

In addition, further calculations show that 0.33 x 300 miles = 100 miles. Next, 100 miles * $0.575 = $57.50 for your total mileage reimbursement.

Sure, you could do the calculations on your own, but using a mileage tracking solution like TripLog to track your mileage will save you untold amounts of time and effort. TripLog covers all the aspects of tracking, calculating, and reporting mileage, much easier than ever before. TripLog can be easily used by employers, employees, the self-employed, business owners, freelancers, independent contractors, and rideshare drivers. Download our app for free on iOS or Android today to see for yourself!

Section 7 – Is Mileage Reimbursement Considered Taxable Income?

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There is always a question of whether or not the reimbursement is taxable income when the employees, self-employed, freelancers, and rideshare drivers consider issues regarding mileage reimbursement. Mileage Reimbursement by the IRS never be considered as income, hence, the tax for this can not be paid. Also, the payment given to the employees as a mileage expense reimbursement is not taxable, but it depends upon the mileage rate set forth by the IRS.

When Mileage Reimbursement IS NOT Taxed…

The payment made to the employees is tax-free while meeting the various requirements of mileage reimbursement by meeting the following criteria:-

● It is important for an employee to qualify for the IRS standard mileage rate while that rate is being used.

● Employee reimbursement occurs under an accountable plan.

● Based on services done for an employer for business, the accountable plan must be done, and it must be adequately accounted for, and must excess reimbursement returned within a reasonable period of time.

The IRS will identify and list the accountable plans on its website. It is important for those who are eligible for reimbursing mileage to keep in mind to review other parts of the information hub that includes information for employers, employees, and the self-employed. It is also important to understand the process of proper mileage log information as well.

mileage reimbursement taxable triplog

When Mileage Reimbursement IS Taxed

The reimbursement that does not meet the criteria that are outlined in an accountable plan is considered as income and, therefore, it is also taxable. The proper meaning of this is described in the below-written points:

● If there is a reimbursement that exceeds the IRS standard mileage rate, it is considered as income and is taxable.

● If there is an excess reimbursement that was paid but was not returned within a reasonable timeframe, it is also taxable as income.

● The reimbursement that is not based on accurate or adequate records is also taxable as income.

It is important to keep in mind that the form of reimbursement is less important than the sum charged as reimbursement. So, It is necessary to ensure that the mileage reimbursement follows all the requirements that are outlined in this article. Additionally, you can also search other areas of this information hub.

Section 6 – Mileage Log Requirements Per the IRS

mileage log requirements for irs

If you’re an employee or a self-employed individual, it is important for you to be aware of all the various and different requirements when it comes to tracking, reporting, and calculating mileage that associates with doing work. It may be possible that an employer has specific requirements regarding reporting of mileage.

Along with this, there are the various mileage calculation rules for the IRS that are applicable to business owners as well as to those who are self-employed. As an employee, there may also be chances that you want to maintain your own records.

What Are Adequate Records As Defined By The IRS?

There are various important things that you could be asked to record. All these are regardless of your employment status. Let’s have a look at these points:

● the mileage that is used for each business use

● Per year, the total mileage accumulation

● trip’s time, place (destination) and purpose

Regarding business mileage logging, there are the typical areas that are deemed as important and good mileage record keeping should be the priority.

Always keep in mind that the recordings of the various activities should be done on time. So, it is better to create the records near the time of the trip. Updation of these records should be done on the weekly basis.

Business owners and the self-employed should adhere to the IRS mileage allowance definition of adequate records. It is related to the coverage of all the expenses that are related to transportation.

Formats The IRS Accepts

A variety of formats such as paper, diary, account book, digital spreadsheets, CSV files, PDF files, Microsoft’s Excel, etc. are used for recording an IRS mileage log. But it is more important to keep accurate records.

The IRS actually makes use of a paper template, but it is from a time before electronic mileage logs.

If needed, it should be told to you by your employer which records they need and what will be the format. Often, employers will make use of the latest technology to keep track of the mileage calculation of an employee. There are various solutions such as TripLog that includes managing employees, rules, and also reporting for multiple employees while allowing employees for the easy tracking of mileage with the use of a smartphone tracking expense app.

Is Taking an Odometer Reading Every Trip an IRS Requirement?

It is not required by the IRS that you need to record your odometer at the beginning and end of each ride. The real requirement for the IRS is that odometer readings should be given on an annual basis, especially in a case that is if you’re using a new vehicle.

It is likely that your employer can ask workers to record odometer readings on the regular basis.

What Are The Requirements For Mileage Tracking?

Currently, there are no requirements for doing mileage tracking or to use a business mileage tracking app. The important thing is that you need to record the mileage of each trip, that means-

● odometer recording should be done at the beginning and end of the trip, or

● tracking and recording your trips differently, for instance, make the use of your phone or a GPS.

Using a mileage app is one of the easiest methods for tracking mileage, such as the Smartphone business mileage app from TripLog Mileage Tracking. Whether using an iOS or an Android device, there are the different tools offered by TripLog that can be easily used by employers, employees, and those who are self-employed.

Are Logging Personal Trips Required?

If you’re using a vehicle for both personal and business purposes, it is important to segregate the portion of mileage being used exclusively for business. Here you can find an example of segmenting out the personal and business mileage. This usually means being diligent and also keeping good records of the vehicles when the car is being used for personal as well as business use.

record keeping irs tax mileage

How Long Records Should Be Kept?

While it depends on the situation, it is better that you will keep records, especially when the things are related to business purposes, for a few years as the IRS indicates.

Generally, this means that it is important for you to keep records that support your deduction (or an item of income) for 3 years from the date when you file the income tax return on which the deduction is claimed.

The IRS considers a return filled early is a return filed on the due date. Along with this, there may be some different rules if your employer is one of your relatives.

Should I Keep Copies Of Records As An Employee?

It will be good to retain copies of documents as staff because sometimes it may be possible that these records could be demanded sometime later. The reason for the request could be the product of something that is not your fault. Keeping all these things in mind, it’s a good idea to have them just in case.

It will be easy for you to track and ensure that you have sufficient records when there is a need for these records at a later date with the help of the use of TripLog’s mobile app. It is one of the best apps that can be used for mileage tracking. Proper monitoring can be done with the use of a digital mileage log and tracker.

What Happens If I Get Audited?

If a situation arises that the IRS audits you and asks for mileage records, it will be in any format that is mentioned in one of the above paragraphs of this article. Also in addition to this, tracking of mileage and recording via the TripLog app helps in making record retrieving faster and easier.

Section 5 – IRS mileage rates for 2021

irs mileage rates 2020 2021 2022

As of January 1, 2021, the mileage rates determined by the IRS, with the rate for businesses being 56 cents, the rate for medical is 16 cents and the rate for driving in relation to charitable organizations are 14 cents. These rates have changed for 2021.

The published rates cover the cost of individuals using their personal vehicles for things related to business. Whether the individual is an employee and is using their personal vehicle for employer-related activities or the individual is self-employed, the IRS publishes a rate for business mileage. It’s worth noting that employers may or may not use the rate published by the IRS, but if the employer does the mileage reimbursement for their employee that is above the rate, the employee is required to pay income tax on that additional amount.

There are different rules for individuals who are using their personal vehicles for business compared to using them for medical or charitable purposes. There are additional sections associated with this hub that includes information for employees, employers, and the self-employed/business owners.

IRS Mileage Rates For 2021

Beginning January 1, 2021, the summary for the standard mileage rates for vehicles, including vans, pickups, and panel trucks, are as follows:

  • $0.56 per mile for business
  • $0.16 per mile for medical purposes
  • $0.17 per mile for moving (used only for Armed Forces individuals on active duty)
  • $0.14 per mile for service of charitable organizations

If you want more detailed information about the standard mileage rates, you can find it on the IRS website.

calculate-irs-mileage-rate-2020-2021-2022

Previous Years’ Standard Mileage Rates

The IRS standard mileage rates typically change each year, usually going up or down by a cent or two. Here are the mileage rates since 1997:

Period Business Charity Medical & moving
202057.51417
2019581420
201854.51418
201753.51417
2016541419
201557.51423
2014561423.5
201356.51424
201255.51423
Jul 1 – Dec 31, 2011 55.51423.5
Jan 1 – Jun 30, 2011 511419
2010501416.5
2009 551424
Jul 1 – Dec 31, 2008 58.51427
Jan 1 – Jun 30, 2008 50.51419
200748.51420
200644.51418
200540.51415
200437.51414
2003361412
200236.51413
200134.51412
200032.51410
1999311410
199832.51410
199731.51210

How Are Rates Determined?

Each year, the IRS takes the average cost of owning and operating a vehicle and uses it to increase or decrease a given rate. The mileage rates for businesses are also determined by the IRS. These costs include both fixed and variable mileage expenses. The mileage rate for charity has been unchanged since 1998 and is a rate that is set by a statute.

How to Properly Track Mileage

Proper mileage tracking is an often tedious and time-consuming process for employers, employees, contractors, freelancers, and business owners of all types. Using a business expense tracking app like TripLog makes calculating your mileage easier and faster. You can download TripLog for free on iOS or Android, or use our web client.

Section 4 – IRS Current Mileage Rate

triplog irs mileage rate calculations

Every year the tax deduction rates for mileage are set by the IRS. Sometimes these rates increase, and other times they decrease. For the sake of example, this article is using 2020’s mileage rates. To learn more about the 2021 mileage reimbursement rate, see Section 5 of this guide. The 2020 mileage rates were as follows:

  • $0.575 per mile driven for business use
  • $0.17 per mile for trips that are for medical purposes
  • $0.17 per mile for moving (be aware of new rules)
  • $0.14 per mile driven in the service of charitable organizations

Once again, these rates can be variable depending on the year. For instance, the rate per mile for business use is down by one-half cent compared to the previous year (57.5 cents in 2020 compared to 58 cents in 2019). For 2021, the IRS standard mileage rate for businesses once again decreased to 56 cents.

The IRS Mileage Rate for Business

Using the 2020 numbers for cars, vans, pickups, and panel trucks, the mileage rate of $0.575 per mile for business is used. Every year, the business mileage rate is provided by the IRS, so employees may be required to use a different rate that is determined by their employer.

In this case, when an employee uses their personal vehicles for various purposes that are related to their work or business, then it becomes his/her employer’s choice to offer mileage reimbursement for employees. Along with this, it’s the employer’s choice to select what rate will be used or what formula they may use to reimburse an employee’s mileage. If an employer chooses to reimburse the employee for costs that are related to the use of their personal vehicles for work-related purposes, they may select tracking mileage expenses when reimbursing their employee.

If the IRS will do the reimbursement to the employees by their employers more than the determined mileage rate, the employee is subject to income tax on the amount above the IRS mileage rate. For the tax deduction for mileage by self-employed individuals or business owners, the rate is set by the IRS.

IRS Mileage Rates for Medical, Charity, and Moving Purposes

Generally, the rates for various activities other than business purposes are different. For calculating the deductible costs of operating an automobile or charitable, medical and moving purposes, one can use the optional standard mileage rates:

a) The mileage rate for business purposes is $0.17 per mile.

b) For moving purposes (allowable only for Armed Forces on active duty), it is $0.17 per mile.

c) The mileage rate for the services of charitable organizations is $0.14 per mile.

calculate reimbursement using irs mileage rate

Is the IRS Mileage Rate the Only Method for Reimbursement?

One can easily use various methods for calculating mileage reimbursements. The IRS mileage rate is one of them. This is available for employers, the self-employed, and business owners.

Not only this, but it is possible for an employer to use other methods that help in calculating mileage expenses that are incurred by employees for reimbursement. There is an option available for the self-employed or business owners for calculating mileage based on the mileage rate.

Along with this, it depends upon the calculation of general expenses that are related to operating a vehicle used for different work-related purposes. In the case when the computation is done on the basis of mileage rate, there will be no deduction of tax from the previously mentioned rates!

Note that reimbursing moving expenses is no longer considered tax-deductible. With that said, there are some exceptions, like Armed Forces on active duty who are required to move under orders. This change is due to the passing of the 2017 Tax Cuts and Jobs Act (TCJA).

Properly Tracking Your Mileage

Mileage tracking of self-employed or employees, contractors, freelancers, and business owners can take up a lot of your time. Instead of manually calculating your mileage, we highly recommend using a powerful mileage tracking app like TripLog. Our app is guaranteed to reduce time and effort for calculating mileage expenses. Download TripLog for free on iOS or Android, or use our web client’s dashboard.

Section 3 – Self-Employed and Business Owners Tax Deduction

tax deductions for self employed and business owners

This section of our information hub includes information about mileage reimbursements for the self-employed, as well as business owners in the United States, and what the best ways to track and report mileage for tax deduction purposes are. This section also contains one of the most important pieces of information for those who are freelancers, independent contractors, and rideshare drivers. If that happens to be you, you’re definitely going to want to read on!

This article has been written to provide the necessary details or data for employers or employees that can help them in such circumstances. In this article, we will learn about the rules surrounding mileage tax deductions for those who are self-employed in the US and give you an explanation on how to calculate mileage and expenses of self-employed deductions.

Different Vehicle Usage Allows for Different Deductions

If you’re doing business and you are also a self-employed taxpayer, you have the right to deduct many expenses accrued. If you are using your vehicle exclusively for conducting business as someone who is self-employed, you can do a deduction for all expenses that are associated with using that vehicle, including oil changes, maintenance, repairs, tire replacements, rotations, etc.

If you use a car solely for business, you have the right to deduct all expenses that are related to operating the car. If you use your personal car for both business and personal activities, then only the expenses that are associated with conducting business can be used for tracking a deduction.

We Know Mileage Tracking, But Remember: Trust, But Verify

It’s mandatory for self-employed individuals to understand several things when they start mileage tracking and reporting. First, it is important for self-employed individuals to understand the details and specific mileage calculations for tracking. You can take advantage of all deductions available as the best course of action and you can also save on your overall tax exposure.

Secondly, the information contained within these information hubs acts as a helpful guide, but they should not be viewed as advice from accounting or tax professionals. As a self-employed individual, you should always check the information contained within the IRS website about the reimbursement of mileage expenses. In addition, self-employed individuals should consider checking with a tax professional or accountant to ensure that they will understand all possible requirements for reimbursement of mileage.

calculate mileage for self employed or business owners

Two Different Ways To Calculate Mileage Deductions

There are two different methods that can be used by self-employed individuals for calculating mileage expenses for the purposes of tax deductions.

Standard Mileage Rate

If you choose to use this method, your calculations will be subject to IRS requirements. For example, as of January 2021, the standard mileage rate was 56 cents (or $0.56) per mile according to the IRS.

Actual Expenses

The expense method is the other method that can be used by self-employed people to claim deductions for expense-related activities, such as operating a car used for conducting business-related activities. With this method, the self-employed individual can list expenses like gas usage, repairs, insurance, maintenance, etc. The IRS issues an updated list of what business owners and self-employed individuals are able to claim when using this method.

It’s possible for the self-employed and business owners to qualify for both methods, but it is necessary and helpful to understand which rule should be applied to each method. When using the standard mileage rate, it is critical to keep track of actual trips and their length (in miles). For those who are using actual expenses, keeping track of all the expenses is required.

What To Do When You Own or Lease a Vehicle

In order to qualify for the standard IRS mileage reimbursement rate, self-employed individuals or business owners must either own or lease their vehicle(s) being used for business. For both ownership and leasing, the criteria are a little different.

If You Own the Vehicle

If you have your own vehicle, then you must adhere to the following requirements:

If You Lease Your Vehicle

If the vehicle is leased, then one should use these requirements:

  • The standard mileage rate must be used for reimbursement during the first year of operation in the business.
  • For all subsequent years, you should use the standard mileage rate method during the entire period the vehicle is being leased. Periods of renewals and newly leased vehicles have been covered here.
  • Simultaneously using five or more vehicles for the business (i.e. fleet operations) is not allowed. It is allowed if you switch between each vehicle. This requirement is helpful as it allows the self-employed or business owners to be mindful of using more than four vehicles for business at any given time.
track mileage for trucks cars pickups

What Kinds of Vehicles Qualify for Mileage Deduction?

Cars, vans, pickups, panel trucks, etc. are vehicles that one uses for business that can qualify for the self-employed mileage deduction.

Tracking and Keeping Records of Mileage

For keeping adequate records, the IRS mileage reimbursement calculator has some requirements. For all transportation associated with business-related activities, the IRS requires self-employed individuals and business owners to log the following:

  • mileage for each business use
  • total mileage for the year
  • time, place (your destination), and purpose

It is important that records should also be timely recorded at or near the time of the incurred expense. The various practices that are deemed acceptable by the IRS include trip diaries, logs, and sheets, as well as account books or similar records.

If you are using a vehicle for both personal and business, records should show business vs. personal use of the vehicle as a percentage. This will include a log of all trips and a calculation of all the shares used for the business.

To make tracking mileage easy for business expenses, TripLog’s mileage tracking app provides a robust and easy-to-use way for self-employed individuals and business owners to keep accurate and detailed records.

What Is the Current IRS Mileage Rate for the Self-Employed?

The IRS has determined that self-employed individuals may deduct 56 cents per business mile when mileage calculations are done. Along with this, the rates for medical, moving, charitable, and federal mileage reimbursement are also set. For example, the rates for 2021 were as follows:

  • $0.56 per mile for business
  • $0.16 per mile for medical purposes
  • $0.16 per mile for moving (used only for Armed Forces individuals on active duty)
  • $0.14 per mile for service of charitable organizations

For up-to-date mileage rates year-to-year, please refer to the IRS website.

Calculating Deductions for Business Usage

Determining the percentage of their vehicles that one is using for business and personal needs is important for individuals. The mileage calculation is not too complex a process, but examples are always helpful. Let’s take a look:

  • Let’s say there have been ten trips that have been taken during the course of a month, with each trip equaling 20 miles. Total personal miles within that month would come to 200 (10 * 20 = 200).
  • Within the same month, there were three business trips taken that totaled 100 miles.
  • When figuring out business use, you can divide business miles by the total number of miles driven. In this example, 33% of the time (100/300 = 0.33), the vehicle has been used.
  • Multiply the number of business miles with the mileage rate, 58 cents.
  • This example shows that the business mileage expense for this month would equal $57.50 in (100 * 0.575).

Transportation That Qualifies for Business Deduction

There is no maximum for the number of miles that can be claimed for a deduction. Always keep in mind how many miles you drive for business purposes. Along with this, there are various additional items to keep in mind while considering mileage deductions for business.

What Constitutes Business Mileage?

  • Driving between two different places of work
  • Driving to meet clients or conducting client work
  • Driving associated with business activities

What Does NOT Constitute Business Mileage?

  • Commuting to work from home
  • Carrying tools or other business items during a commute
  • Having advertising or company information displayed on your vehicle

For additional information regarding working from home and related guidelines, please visit the IRS website.

Additional Expenses

In addition to tracking mileage expenses and reporting them in a detailed and easy-to-understand way, self-employed individuals and business owners should keep in mind that other expenses, such as parking fees, tolls, and related costs incurred when conducting business, qualify for deductions. These costs do not qualify for deductions if commuting to your place of work.

That’s the guidance that we have provided on the basics of deducting mileage or tax deductions for self-employed in the US. We hope we’ve been of assistance! Try TripLog for free today on iOS or Android, or through our web client’s dashboard.

Happy tracking!

Section 2 – Mileage Reimbursement Plan for Employers

mileage reimbursement plan for employers

Employers with staff who regularly travel and engage in company-related activities that are conducted outside of normal daily commutes will likely reimburse their employees for travel expenses. There is no federal requirement indicating that employers must reimburse employees when they use their personal vehicles to conduct company business, but most companies will usually agree to do so.

In addition, while there is no federal requirement, individual states may have reimbursement requirements that employers and business owners must follow. Employers should check with their individual states where employees reside to determine the requirements, if any, regarding mileage reimbursement.

For employers, it can be to your benefit to have a mileage reimbursement plan in place, as these business-related expenses are tax-deductible and will help in reducing your overall tax exposure. In addition, having such a plan in place will make your company that much more attractive to prospective employees, especially if competing against another employer that does not offer expense reimbursement.

The IRS Standard Mileage Rate

Each year, the IRS issues standard mileage rates. These rates represent the maximum mileage rate that employers can use in order to receive their full deduction. In addition, employees should know that any amount they receive up to this amount is exempt from taxation. Any amount they receive over this amount is subject to standard income tax. Mileage rates are calculated by multiplying the total business mileage covered with IRS standard mileage rates, or the employer’s own rates.

triplog company business mileage reimbursement program

Different Ways For Employers to Reimburse For Mileage Expenses

An employer may choose to reimburse their employees for general automobile expenses or reimburse based on mileage. There are various ways of ensuring employees are reimbursed for those costs associated with using their personal vehicle for company-related activities.

Mileage Allowance

An employer may provide their employees with a mileage allowance. This type of allowance is usually paid to the employee in advance (such as at the beginning of the month) to cover any transportation expenses the employee might incur. The biggest challenge in following this method of reimbursement is the need to track all receipts, ensuring that the expenses align with the allowance and that any allowance that is overpaid is given back to the employer.

In addition, employers should keep in mind that mileage tax deductions only go up to the standard IRS mileage allowance, because if the allowance total given to the employee is higher than what the IRS standard mileage rate would have been, the overage must be reported as income rather than reimbursement.

Mileage Reimbursement

Although mileage reimbursement is typically straightforward, there are variations to this method that employers, and employees, must be aware of. The first option is the standard mileage rate, and the second is the fixed and variable rate or FAVR.

Standard Mileage Rate

The standard mileage rate is the easiest and most straightforward way of tracking and reimbursing employees for use of their personal vehicles for employer-related activities. The IRS standard mileage rate addresses this specifically and is designed to make it very easy and straightforward for both the employer and employee.

It’s important to keep in mind that an employer is not required to use the IRS standard mileage rate and may use their own rate. If this is the case, any additional reimbursement made to the employee above the IRS rate is subject to income tax.

Those standards are set in order to make sure that mileage tax deductions shouldn’t be misused by either the employee or the employer.

Fixed and Variable Rate (FAVR)

An employer may choose to use a combination of a variable mileage rate as well as a fixed cost to reimburse for other items:

  • The variable rate is used to cover variable costs such as gas, maintenance, and oil changes.
  • The fixed rate is used to cover standard month-to-month costs such as insurance, lease payments, depreciation, etc.
employer mileage reimbursement plan

Employers Should Have An Accountable Plan

To ensure the amount an employer gives to an employee properly covers a reimbursable mileage expense, the employer must meet the requirements of an accountable plan. The rules of an accountable plan are determined by the IRS and include the following:

  • Your expenses must have a business connection – that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer.
  • You must adequately account to your employer for these expenses within a reasonable period of time.
  • You must return any excess reimbursement or allowance within a reasonable period of time.

Each trip that qualifies to be included for reimbursement must be recorded by the employee and be for a business purpose in mileage logs. Also, recording each transaction with proof of actual receipt of expense would be beneficial and easy for expense & mileage reimbursement.

These mileages are to be closely monitored by the employer and verified each business mileage in order to get exact track of business mileage covered by employees. There are available technology tools that are affordable and easy to use, including TripLog’s mileage tracker app.

In addition, the IRS indicates that a “reasonable period of time” should be used to track, submit and manage mileage expenses between an employer and employee. The timeframe suggested by the IRS is 120 days. Specifically, the IRS states on their website:

  • You receive an advance within 30 days of the time you have an expense.
  • You adequately account for your expenses within 60 days after they were paid or incurred.
  • You return any excess reimbursement within 120 days after the expense was paid or incurred.
  • You are given a periodic statement (at least quarterly) that asks you to either return or adequately account for outstanding advances and you comply within 120 days of the statement.

All Employees May Not Be The Same

Since there are differences among employees in most companies, the IRS standard mileage rate requires that each employee qualifies individually. Records must be properly kept in order to meet the requirements of an accountable plan.

Employers should hire a specific staff member in the company that looks after the total business mileages covered by employees and verify actual business mileage from mileage records from the mileage logbooks.

To review the requirements set forth for employees, you may refer to Section 1 – Mileage Reimbursement: Employees for more information.

The Best Way to Track Mileage

While some employees who incur expenses keep track by using a variety of methods, the easiest and most cost-efficient method is to use a tool such as TripLog’s mileage and expense tracking app. This easy-to-use app is available for download on iOS or Android, or through our web client’s intuitive dashboard.