When your team is small, it’s easy to track mileage via spreadsheet. Inputting the trip details for three employees usually isn’t that complex. But imagine the day when your company grows to nearly 250 mobile employees. That’s when keeping track of daily trips in Excel becomes a nightmare.
From missing trip logs, disputed claims, to hours of reconciliation, and that nagging voice in the back of your head wondering what will happen if the IRS decides to take a closer look- manually tracking mileage comes with many downsides.
In this article, we’ll explore why manual mileage tracking fails, what you can do to stay IRS-compliant, and how automation tools can simplify your mileage tracking process.
The real problem with mileage spreadsheets
Spreadsheets are great when your team is small. They are free and everyone knows how to use them. But as your mobile workforce grows, the cracks start showing.
1. Costly human errors
Every single manual entry is a chance for something to go wrong. One technician rounds 23 miles up to 25. Another one forgets to log their afternoon appointments entirely.
Seems minor, right? Except when dozens of employees are rounding hundreds of trips every month.
Errors that seem “small” have costly consequences:
- Underpayments: once your employees find out they were shorted for mileage, they lose trust in you.
- Overpayments: you end up paying for mileage that was never traveled, which eats into your profit.
- Penalties and fines: missing trip details and messy logs won’t hold up during an IRS audit.
2. Lack of transparency
Mileage disputes kill trust on both sides.
When documentation errors keep piling up, you can't help but wonder if your employees are being straight with you. And your team picks up on that doubt. They start feeling like you don't trust them or value their work. And the worst part? Spreadsheets give you zero way to verify routes or confirm trip details.
So you end up having awkward conversations where nobody wins. You end up wasting time playing detective and verifying mileage reimbursement for mobile teams, and employees lose trust in a process that should have been fair and transparent.
3. Administrative overload
Let's say you run a regional property maintenance company with 25 field technicians. Every week, mileage submissions come in via email or text.
When it’s time to run payroll, your HR team spends hours verifying entries and manually calculating reimbursements. More often than not records are submitted incomplete, which means more back-and-forth between supervisors and technicians to verify accurate mileage totals.
One overlooked mileage entry can:
- Mess up payroll totals
- Delay payments
- Frustrate employees who are counting on timely reimbursement
By the end of the month, your admin team has lost entire workdays just tracking down numbers. Your team feels bogged down, and as your company continues to grow, the problem just gets worse.
4. Compliance risks
The Internal Revenue Service (IRS) and the Canada Revenue Agency (CRA) have specific mileage documentation requirements.
To keep reimbursements tax-free, the following trip details must be included on mileage logs:
- Date of travel
- Starting and ending points
- Business purpose
- Miles driven
During an audit, weak documentation that lacks any of these points may have you facing back taxes and penalties for "unsubstantiated" claims. Flat allowances can also become taxable if they are not linked to actual mileage logs.
Mileage reimbursement basics
Reimbursing employees for business mileage requires more documentation and an understanding of the ins and outs of mileage reimbursement to comply with IRS regulations.
What qualifies as business mileage?
Business mileage pertains to any driving you do solely for work purposes.
Examples of business mileage include:
- Driving between different job sites throughout the day
- Driving to meet clients or pick up supplies
- Traveling to temporary work locations
- Attending work events like training sessions, conferences, and trade shows
- Traveling to another company office for meetings
Keep in mind, an employee’s daily commute from home to the main office can not be classified as business mileage.
How do IRS and CRA standard mileage rates work?
Every year, both the IRS and CRA release standard mileage rates that cover the full cost of driving — including fuel, maintenance, insurance, and vehicle depreciation.
IRS mileage rules
The IRS standard mileage rate
covers all business driving costs. For 2025, the rate is 70¢ per mile.
Example: If a sales rep travels 50 miles for a client meeting, the reimbursement would be
$35.
Reimbursements are generally tax-free if mileage logs show where employees went and why.
CRA mileage rules
Canada follows a similar approach. The
CRA mileage rate
sets per-kilometer amounts for 2025:
- 70¢ per km for the first 5,000 km
- 64¢ per km thereafter
- +4¢ per km in Nunavut, NWT, or Yukon
Mileage reimbursement rates change every year, with new rates usually being announced in December before the new year begins. Make sure to stay on top of IRS mileage rate updates to avoid under- or overpaying your employees.
What is the difference between flat allowances and mileage reimbursements?
Some companies skip the whole mileage tracking and just give employees a flat car allowance every month. Sounds easier, right? Well, sort of. There is a tax trap you need to know about.
If you are handing out car allowances without any mileage records to back them up, the IRS treats that money as regular taxable income. Which means everyone pays more in taxes.
Here is what this looks like in practice:
You give 10 field technicians a $500 monthly car allowance, and don’t require them to track mileage.
You end up paying: $500 × 12 months × 10 people = $60,000 a year.
Without mileage documentation, the full $60,000 is taxed like regular wages. This means you are on the hook for payroll taxes, and each employee's taxable income just went up by $6,000. So now, both you and your team are paying tax on money that was supposed to cover vehicle expenses.
However, when you reimburse mileage based on the actual miles driven and you have the logs to prove it, that money is completely tax-free for everyone involved.
What is FAVR and how does it work?
If you have a large mobile workforce or your employees’ trips are classified as high mileage, using the Fixed and Variable Rate (FAVR) method for mileage reimbursement might be a smart choice.
The FAVR method reimburses employees in the following ways:
- Fixed monthly payment: includes insurance, registration, taxes, and depreciation.
- Variable per-mile payment: covers fuel and maintenance
The FAVR method is approved by the IRS, and it can actually be more accurate than the standard rate if your employees are traveling a lot throughout the month. But it can be paperwork heavy, which can be a downside for teams looking to increase efficiency and productivity.
How do you handle specific mileage reimbursement cases?
Mileage tracking and reimbursement can be messy if you don’t have a solid tracking system in place.
Let’s walk through a few common scenarios and how you would handle reimbursement in these situations.
1. The home-to-jobsite gray area
Let’s say your construction foreman lives about 12 miles from the main office but rarely reports there. Most days, he drives directly to job sites, some 5 miles away, others 40.
What can you reimburse?
If they have a regular workplace:
The IRS lets you reimburse the distance beyond the regular commute.
That means if your construction foreman travels 12 miles every day, but today’s job site is 25 miles, you would have to reimburse 13 miles each way (25 – 12 = 13).
If they don't have a fixed office:
For people who are always on the road, like sales representatives or inspectors, the first trip out in the morning and the last trip home count as commuting.
Only the driving between client sites or job locations during the day counts as reimbursable business mileage.
2. The mileage cap problem
Some companies cap how much mileage they will reimburse daily or monthly to keep costs under control.
But this practice can have costly repercussions.
Here’s why:
If an employee drives 100 miles for legitimate business purposes but your policy caps reimbursement at 80 miles, they are essentially paying 20 miles out-of-pocket (at 70¢/mile).
If this happens enough times, your employees are bound to get frustrated and start looking for other jobs. And depending on your state, you might actually be breaking labor laws that require full reimbursement of work expenses.
Instead, opt to use a commute deduction that excludes personal driving miles but reimburses all actual business mileage.
3. The fuel card double-dip
Company fuel cards make life easier, but they can create a sneaky problem. If employees use the card for gas and are also paid mileage reimbursement (which includes fuel costs), you are basically paying twice for the same thing.
There are two ways to fix this:
- Give employees fuel cards and reimburse only the non-fuel vehicle costs like maintenance, depreciation, and insurance.
- Ditch the fuel cards and just cover everything through the standard mileage rate.
4. Business vs. charity mileage rates
If you are running a nonprofit, remember that the IRS has two different mileage rates:
- Business rate (70¢/mile for 2025): For paid employees driving for work
- Charitable rate (14¢/mile for 2025): For unpaid volunteers driving on behalf of your organization
Use the full business rate for actual employees doing their jobs. The charity rate is only for volunteers. Mix these up, and you are either shortchanging your staff or creating compliance problems.
5. Contractors vs. employees
Contracted workers usually do not get mileage reimbursement from you. They handle their own vehicle expenses and deduct them on their tax returns.
However, the rule for company employees is different. Because of the Tax Cuts and Jobs Act of 2017, your team can no longer deduct unreimbursed business expenses on their federal taxes.
This makes employer reimbursement critical for employees. Without it, they are absorbing work-related costs with zero tax benefit. For contractors, just be upfront about your mileage policy from day one, so nobody is confused about what is or isn't covered.
Why automation beats spreadsheets every time
Automation is not just "nice to have,” it fundamentally makes mileage reimbursement much easier. It tracks trips in real-time, calculates rates automatically, and provides you with instant, accurate reports. No delays, no disputes.
1. Accuracy without the guesswork
Using spreadsheets to track mileage and calculate reimbursement might seem like a simple solution. Create a few columns and input daily mileage and you’re good to go. But when you manage a large workforce, spreadsheets get messy, and mileage entries are often deleted or added to the wrong cells.
Using an automated mileage tracking app like Timeero uses GPS technology to accurately record every trip. Employees are no longer submitting guesstimates or trying to recall details from two weeks ago. All trip details are recorded in real time.
2. Faster approvals and payments
When only managers have access to spreadsheets, employees’ daily mileage submissions can sit unread in an inbox for days. When managers finally input mileage entries, additional time is needed to cross-check trip details and confirm job assignments. By the time finance processes everything, another week has gone by.
Automating your mileage reimbursement process gives you back valuable time. With a mobile app like Timeero, mileage data flows straight from an employee’s device to your company dashboard, allowing managers to approve submissions in minutes.
3. Transparency for everyone
Spreadsheets allow you to see numbers but don’t paint the full picture of business travel. When nobody can see what is really going on, people start questioning things, and the whole approval process slows to a crawl.
“There’s no way he actually drove 50 miles today. He was only on the clock for an hour.”
“I wonder if he made additional stops along the way, this is a lot of mileage.”
But with an automated mileage tracking system, your questions have answers. Employees’ trips and mileage are verified with GPS technology. With a transparent audit trail, you eliminate suspicions and build trust.
4. Time and cost savings
Manual mileage tracking is expensive. Teams waste hours collecting logs, verifying trips, and fixing errors. For growing mobile teams, that inefficiency scales quickly, and so do payroll costs.
Automation slashes the admin work. Tools like Timeero handle the tracking, generate the reports, and sync directly with your accounting system. This gives you more time for actual revenue-generating work.
5. Built-in compliance
Automated systems like Timeero capture all the documentation the IRS requires:
- Date of travel
- Starting and ending points
- Purpose of business travel
- Total miles driven
Everything is stored securely and ready for audits or reports.
Timeero's commute mileage feature keeps you compliant by automatically classifying commute miles. You can set up rules that apply to everyone or customize them for individual employees – whatever works for your situation. Either way, the system handles all the calculations automatically.
Simplify your mileage reimbursement for mobile teams
Many companies are still using the same manual tracking methods from 10 years ago. But we all know that those processes are just not built for today's mobile teams.
If you are tired of the spreadsheet nightmare and want something that actually works, Timeero can help.
GPS tracking handles the distance automatically, commute miles get deducted without you thinking about it, and everything flows straight into payroll. Your mileage reimbursement process can finally be as simple as it should be.
Ready to ditch spreadsheets for good? Start a free trial today (no credit card required) and see how much simpler mileage tracking can be with Timeero.
FAQs
Is mileage reimbursement taxable?
Mileage reimbursement is not taxable if you follow the IRS or CRA standard rates and keep accurate mileage logs. If reimbursements exceed those rates or lack proper records, the additional amount is considered taxable income for the employee.
Can a company cap mileage reimbursements?
Yes, but capping mileage comes with compliance risks. If a cap prevents employees from being fully reimbursed for legitimate business mileage, the company risks underpayment and morale problems. The IRS allows reimbursement based on actual business miles driven, so using a cap should be done carefully and justified by policy.
What happens if an employee overreports mileage?
If an employee reports excessive mileage, the IRS treats the additional payments as taxable income. It can also cause problems during audits. Automated mileage tracking prevents this by verifying each trip with GPS data, ensuring every reimbursed mile is accurate.
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