From time to time, your employees will forget to keep track of their business miles. If your company reimburses employees for mileage and uses it to deduct taxes, you will need reliable and accurate records of the expenses your company reimbursed.
The situation may be challenging - you would like your employees fairly compensated for their costs. On the other hand, you would rather avoid any potential trouble with the IRS.
There is no need to panic. The situation may be complex, but, in most cases, it is not impossible to solve. The IRS does, in fact, offer a decent solution.
This article will discuss what to do if your employees inform you that they forgot to track mileage and how to prevent such situations from reoccurring.
What Happens If You Forget to Track Mileage?
Suppose one of your employees forgot to track mileage. In that case, they won't be able to provide you with factual data on their business travels, risking the accuracy of all your further calculations.
The more time passes from the day of their business travel to the day of making their claim, the fewer details of their journey they will remember.
But forgetting to track mileage isn't something new and can occasionally happen to everyone. For these reasons, the IRS does allow a person to piece together a mileage log based on incomplete records.
According to the IRS, if a person doesn't have complete records to prove an element of a cost they want to deduct or claim compensation for, then they must prove it with:
- their statement, which includes specific information about the component, and
- other sufficient supporting evidence.
This means that an employee who forgot to track mileage and your company can fill in the blanks on a fragmentary mileage log to compensate the employee while still being able to deduct taxes.
However, you need to ensure that your mileage matches your evidence. Remember that you cannot make estimates of the mileage, as the IRS may disallow your entire mileage deduction claim.
What If I Didn't Keep Track Of My Mileage?
When an employee informs you that they forgot to track mileage for work, consider the other types of sufficient supporting evidence they or the company could provide.
According to the IRS, the nature of a person's work, such as making deliveries, can provide circumstantial evidence of using their car for business purposes. In such cases, as the IRS states, invoices of deliveries can help a person establish when they've used the car for business-related purposes.
You can use the same logic for an employee who forgot to track mileage. For example, a home health nurse can use their EVV as proof of business purpose for travel, as it includes all the necessary details the IRS might demand. Well, except for the mileage, you can calculate.
Clocks in and out at employers' various locations can also be used to re-create the employee's forgotten journey partially. Invitations to the conferences and proof of attendance with verifiable data will also come in handy in such situations.
This way, if an employee forgot to track mileage for taxes, they could still establish at least the minimum mileage for compensation and deduction and satisfy the IRS demands.
To keep your company protected, always opt for the shortest route option so that you can claim taxes with sufficient evidence. A minimum compensation or deduction is still better than none.
Useful tip: Google Maps Timeline can be a valuable tool to help your employee remember their whereabouts on a specific date and routes they might have taken.
Do I Have to Keep Track of Mileage?
If you want to use your business-related miles for a tax deduction or claim your expenses for mileage reimbursement, you must keep track of the miles you've driven.
The most critical data you need to provide is accurate mileage for the travel you want to deduct or claim expenses for.
As an employer, you've probably come across employees wondering about the necessity of recording their miles a dozen times. When first using their vehicle for business-related purposes, most employees don't have a clear idea about mileage tracking, its purpose, and its importance.
And let's make it clear, not everyone has to know about the principles of mileage reimbursement and tax deduction.
However, if you don't explain the matter thoroughly, your employees may think all that tedious record-keeping is your nonsensical caprice, keeping them away from their primary working tasks.
Filling in the spreadsheet with the mileage and travel data will be a matter of minor importance to them, and you shouldn't be surprised when an employee tells you they forgot to track mileage.
The best way to handle the matter is by having an efficient mileage tracking solution and a mileage reimbursement policy ready for all your employees. You can check out our Resources center to learn more about the Mileage Reimbursement Policy and download our free template that you can tailor to fit your company's needs.
Use this policy to explain the importance of keeping accurate records of the miles and the impact keeping track of the mileage might have on your business.
Your employees need to understand that to claim their costs in a way that makes it possible for your company to deduct taxes, they must keep track of their mileage.
How to Always Have IRS-Ready Mileage Records?
As we've mentioned before, business miles are deductible for companies, but only if the company can provide accurate and reliable mileage logs. A mileage log is a paper log, a spreadsheet, or an electronic log that records miles your employees make for business-related purposes.
The IRS doesn't require a specific method a company will use to log miles, as long as the records check out. Under the IRS demands, records must include the following data:
- The time and date of the travel
- The total number of miles driven
- Destination. Even though it is not precisely required, it's savvy to record both the start and stop location for more detailed records.
- The purpose of the business drive.
If an employee forgot to track mileage and wants the company to reimburse them for their expenses, you will need to re-create the journey using sufficient supporting evidence.
Choose Your Mileage Tracking Method Wisely
However, even though equally accepted by the IRS, specific methods of recording mileage are more efficient and reliable than others. Some of them can even decrease the chances of employees forgetting to log their miles drastically.
Although outdated and inefficient, the paper-based model of keeping track of mileage is still present. This method is rarely accurate and reliable due to human error and fraudulent practices. Plus, it's a nightmare for employees - both those who have to think about filling in all the data and the ones who need to prepare the data for the payroll. Not to mention the issue of archiving all these records and finding your way through them when searching for a piece of information.
Using digital spreadsheets to log in the miles is a more advanced method for keeping track of miles. However, as it relies on manual data input, it shares many disadvantages with its predecessor, mostly related to the accuracy and reliability of data.
Using a GPS tracker app, like Timeero, to keep track of employees' miles during their working hours is a great way to ensure your business-related miles are always recorded under IRS standards.
This is especially important for companies with a large mobile fleet, consisting of field employees spending much of their business hours on the road.
Using such software, the company will have all the details of business-related trips in one place, with records consisting of data that is easy to verify.
Streamline Your Mileage Tracking Practices
Using tools with GPS and geofence capabilities will streamline your mileage tracking practices and make it easier for your employees to keep track of their business-related miles.
The modern mileage tracking tools, such as Timeero, are easy to use and place no burden on your employees' shoulders. Quite the opposite - most of the employees will be happy when switching to an automated mileage tracking solution, as they wouldn't have to worry about keeping track of their miles during their shifts - the software will cover for them, always.
On the other side, your company will have real-time insight into your employees' travels and accurate, reliable, and verifiable records of their journeys that are ready for the IRS audit.
Using Timeero integrations with the most common payroll software, you can streamline the entire reimbursement process, ensuring your employees are always paid adequately for their mileage.
So, What If I Forgot to Track Mileage?
In case you or your employees forgot to track mileage, don't panic. Even the IRS accepts such situations can happen to everyone, so not everything is lost.
Find sufficient supporting evidence to prove your business-related mileage and re-construct your travel. Don't estimate the mileage - it's better to accept a viable minimum that you can establish than risking your compensation.
The crucial thing is to prevent it from happening again. You can achieve this by opting for automated GPS mileage tracking solutions that will always have your miles covered.