12 Costly Mileage Reimbursement Blunders That Could Drain Your Wallet
Emily Maina
Last update on:
March 24, 2025 9:40 AM
Published on:
For companies that require their employees to use their personal cars for work, mileage reimbursement is a common practice. However, reimbursing employees for mileage can prove costly if your company hasn’t adopted a modern mileage tracking solution.
In this article, we will discuss 12 common mistakes organizations make in mileage reimbursement, along with their consequences, and how to best prevent and resolve these mistakes.
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Take Control of Your Mileage
Maximize savings with precise, IRS-approved tracking.
Who is eligible and what trips are eligible for mileage reimbursement
Approved methods for tracking mileage
Submission deadlines and reimbursement rates
Train employees on the reimbursement policy to ensure compliance and clarity.
Make your policy accessible to your workforce through an internal company portal or company handbook.
3. Misclassifying personal and business mileage
Mileage reimbursements are issued to employees who use their personal vehicles for all business-related travel. Businesses and employees may misclassify personal mileage as business accidentally or intentionally. Both of which could have severe financial and legal consequences.
Potential consequences
Violation of IRS policies if personal mileage is incorrectly reimbursed.
Overpayment or underpayment of employees impacts your company’s profit and potentially harms employee morale.
Potential audit triggers and financial penalties due to inaccurate mileage claims.
Solutions
Educate employees on proper mileage classification and provide clear definitions of business-related travel.
Use mileage tracking apps that allow real-time trip categorization to prevent errors.
4. Incorrect application of IRS rates
The IRS standard mileage rate is revised every year and takes into account fuel prices, vehicle maintenance costs, insurance rates, and vehicle depreciation. Companies can choose whether or not to reimburse employees at the standard mileage rate, but IRS rates for medical and moving purposes as well as charitable rates are fixed and must be followed every year.
Potential consequences
Undercompensating employees, leading to dissatisfaction and potential disputes.
Overcompensating employees for mileage, increasing unnecessary business expenses.
Incurring penalties associated with failing to reimburse mileage at the applicable IRS rates for medical, moving, or charitable rates.
Solutions
Stay up-to-date on current mileage rates and update company policies to ensure accurate reimbursement.
Training finance teams on how to apply the correct rates when processing reimbursements.
Use mileage tracking software that automatically updates mileage rates to preventcalculation errors.
5. Inadequate documentation and recordkeeping practices
To remain compliant with IRS recordkeeping requirements, you will need to keep accurate and detailed mileage records and trip logs. Inadequate recordkeeping can lead to potential IRS audits, reimbursement disputes, and financial loss.
Potential consequences
Inability to prove the validity of claims during audits.
Reimbursement delays and disputes between employees and finance teams.
Subject to penalties imposed by the IRS for non-compliancedue to missing or incomplete records.
Solutions
Require employees to submit detailed mileage logs, which include the following information:
Date of travel
Trip purpose
Beginning and ending locations
Distance traveled
Use digital recordkeeping systems to securely store data and increase the efficiency of record retrieval.
Implement an automated mileage tracking solution to accurately record mileage.
6. Failing to separate mileage from other expenses
Employees that travel for work often incur multiple expenses during trips (i.e., meals, lodging). Failing to separate additional business expenses from mileage complicates tax reporting and increases the risk of financial mismanagement.
Potential consequences
Difficulty budgeting and forecasting expenses, as there is no prior data to build off of because mileage was labeled as an unclassified expense.
Inability to account for expenses, since reports may not separate mileage from other business costs.
Solutions
Maintain separate expense categories for mileage and other business costs.
Encourage employees to submit mileage claims separately from other expense reports.
Use accounting software that automatically distinguishes mileage related costs from other expenses.
7. Inconsistent reporting methods
Allowing employees to use different methods for reporting mileage is confusing and inefficient. Without a standardized reporting system in place you may process inaccurate claims, have difficulty tracking reimbursements, and violate IRS regulations.
Potential consequences
Greater difficulty in auditing mileage claims due to varied reporting formats.
Potential IRS scrutiny if documentation lacks uniformity.
Solutions
Standardize mileage reporting using a single approved format, such as a designated mileage tracking app.
Mandate the use of digital logs for mileage recordkeeping.
8. Failure to routinely review records and submit payroll data on time
Employers should regularly review mileage logs to identify missing mileage records and instances of fraudulent mileage entries. When employees submit mileage data for reimbursement, they should do so within a specified time frame for swift payroll processing.
Potential consequences
Unidentified errors due to inconsistency of reviews.
Risk of non-compliance with IRS regulations if records are not maintained properly.
Solutions
Establish clear submission deadlines for proper payroll processing.
Automate reminders to encourage employees to submit mileage reports on time.
Conduct regular reviews of submitted claims to catch errors early.
9. Overlooking technology solutions
Businesses continue to rely on outdated manual methods instead of adopting modern mileage tracking solutions. A lack of automation increases the risk of errors, inefficiencies, and non-compliance with IRS regulations.
Potential consequences
Increased administrative workload for finance teams.
High risk of errors and IRS violations due to manual tracking methods.
Decreased productivity levels, as a majority of employees’ time is devoted to manually inputting mileage records and trip details.
Solutions
Invest in mileage tracking tools like Timeero.
Timeero provide users with:
Automated GPS-powered mileage tracking technology
Real-time mileage logs
Route replay with breadcrumb technology
Seamless reimbursement calculations
Integrations with popular payroll systems to simplify reimbursement
Many organizations neglect regular audits of mileage reimbursement data. Without proper monitoring and analysis, companies expose themselves to financial loss and potential IRS violations.
Potential consequences
Increased likelihood of being audited by the IRS and incurring hefty fines.
Lack of visibility into travel patterns and reimbursement trends.
Solutions
Conduct periodic mileage audits to identify and correct discrepancies.
Use analytics tools to track mileage patterns and optimize reimbursement policies.
Implement fraud detection measures to prevent false claims.
11. Disregarding employee concerns
Listening to your employee’s concerns can be a great way to gain insight and feedback on your current mileage reimbursement process. Choosing to disregard employees’ concerns can prove costly, as you may be able to prevent reimbursement delays and avoid IRS violations when you incorporate your employees’ suggestions.
Potential consequences
Decreased employee morale and workplace dissatisfaction.
Increased tendency for employees to stray from reimbursement policies and procedures.
Solutions
Invite employee feedback by conducting regular surveys.
Adjust reimbursement policies based on practical employee input.
Provide a dedicated platform for employees to voice concerns and suggestions.
12. Failing to account for location-based variations
Transportation costs such as fuel and insurance vary from state to state. Companies that implement a one-size fits all approach are more prone to making mileage reimbursement mistakes. It is important that companies choose the best mileage reimbursement method for their business needs.
Potential consequences
Under-reimbursing employees for travel in high-cost areas, leading to dissatisfaction.
Over-reimbursing employees for mileage inareas with lower travel costs, increasing business expenses.
Inaccurate financial planning due to inconsistent cost assessments.
Solutions
Adjustment of regional mileage rates to account for fuel price and economic conditions.
Using location-based mileage tracking tools to ensure fair and accurate reimbursements.
Regularly review mileage trends and make policy changes as necessary.
Use Timeero to avoid mileage reimbursement mistakes
Errors in mileage reimbursement are costly and most can be avoided by choosing to use mileage tracking software like Timeero.
Timeero simplifies your mileage reimbursement process, improves the accuracy of mileage logs, increases workforce efficiency, all while keeping you compliant with IRS guidelines.
Improve your mileage reimbursement process with Timeero, one of the best mileage tracking apps on the market today.
Precision Mileage Tracking You Can Trust
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Emily Maina is a tech-savvy writer with a passion for creating content. With years of experience in the industry, she is well-versed in the latest trends and developments in the tech industry. When she’s not working, Emily enjoys exploring the great outdoors or watching her favorite shows.
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