Complete Mileage Tracker Guide: Everything You Need To Know

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Why You Need a Mileage Tracker/Mileage Log

There are numerous benefits to using a mileage tracker and keeping a mileage log for your business. These mainly boil down to gaining valuable insights into your expenses, cutting costs, and improving the efficiency of your business. 

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Here are some of the main reasons why a mileage tracker is indispensable for all companies whose employees require a vehicle for business purposes. 

1. Qualify for a mileage tax deduction with IRS-compliant logs  

If you or your employees use a personal vehicle for business, your company is eligible for significant tax deductions. We’re talking about hundreds or even thousands of dollars a year that you’d otherwise leave lying on the road. 

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At the same time, company-owned vehicles are considered taxable fringe benefits if you or your employees use them for personal purposes. 

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Therefore, in either case, it’s necessary to create IRS-compliant logs so that you can substantiate the business use of a vehicle and qualify for a tax write-off. 

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What are IRS-compliant mileage logs?

Using a mileage tracker means creating logs that are compliant with these IRS guidelines: 

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- Every mileage log has to be up to date. The best practice is to record it on the day of the business trip or within the period of up to 3 months after it at the latest. Otherwise, the IRS won’t accept it

- It’s your responsibility as an employer to keep track of mileage and not your employees’  

- Records have to be kept for 5 years after filing a tax deduction claim

- A valid mileage log has to contain the exact date of the trip, the mileage for each business use, the destination, and the purpose. 

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The point of all this is to prove to the IRS that payments your employee receives from you on the account of a car allowance, reimbursement, or fuel card, don’t constitute taxable income or compensation, but business expenses. 

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That’s the reason why these payments should match the expenses your employees or you incur while using a vehicle for business purposes. 

Make sure to check the IRS mileage rates for 2023 as they vary each year. 

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To learn about mileage rates in Canada, read our CRA Mileage Rate: A 2023 Guide.

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Anything above these rates is considered taxable income.  Although it doesn’t seem much at first, it quickly adds up. For example, if you or your employees drive 100 miles a week for business, it’s possible to get a mileage deduction in the vicinity of $2,800 annually. 

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It’s obvious how much you can save by meticulously tracking mileage, and Timeero is an easy-to-use and highly reliable solution that facilitates this tedious process. 

2. Easily calculate reimbursements using the accounting software integration 

By adopting a mileage tracker, you’ll facilitate the reimbursement procedure and make sure that all mileage expenses are covered accurately. 

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An app like Timeero integrates with payroll and accounting software such as Gusto, Xero, ADP,  and Paychex.

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This way, the entire process will be automated and streamlined at all times, and mileage records can be easily exported to the payroll and accounting software of your choice. Needless to say, it will be infinitely easier for you to calculate and manage reimbursement. 

3. Prevent fraudulent expense reimbursements and save 5% of your annual revenue  

Although the majority of your employees most probably don’t resort to dishonest practices, the truth is that 5% of an average organization’s annual revenue is lost to fraud. This doesn’t mean that your employees wait for every opportunity to rip you off, but some measures of precaution are welcome. 

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According to surveys, almost 35% of employees tend to artificially inflate mileage before they claim reimbursements. As a result of expense fraud, U.S. employers lose $2.8 billion annually. The factor that enables this kind of fraudulent behavior is the process of manually reporting business travel expenses. 

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A mileage tracking app will put the brakes on expense fraud as well as help you control and optimize your mileage spend. And if we bear in mind that inaccurate reporting can ultimately interfere with IRS compliance and affect your bottom line, it’s clear how crucial implementing a solution like Timeero is for your business. 

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4. Ditch bulky and expensive hardware in favor of a user-friendly app 

The days when tracking mileage required bulky hardware and laptops for keeping mileage records are luckily behind us. 

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A mobile app GPS-powered mileage tracker is an easy-to-use solution since all it takes is for your employees to install it on their mobile devices.  It allows you not only to track your entire team’s mileage accurately but also to get a breadcrumb trail of their trips. 

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Timeero comes with a geofencing feature, which means that your employees will receive a notification to start tracking mileage whenever they leave the perimeter you specified. Simultaneously, you’ll be alerted if someone fails to do so. 

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It’s worth mentioning that Timeero automatically tracks your employees’ movements – every time they move more than 150 feet, the app captures a GPS point. 

Mileage Tracking Apps vs Paper and Spreadsheet Logs

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Despite the numerous benefits of a mileage tracker, many companies have still not embraced it and are lagging behind.

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Hence it’s important to compare the pros and cons of using an app vs going the more old school route of pen/paper or spreadsheet entries.

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Here are the main pros and cons of each mileage capturing method. 

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Paper mileage logs

As the name suggests, this type of mileage logs are recorded in your regular paper book, and they include the date, time, business purpose, odometer readings, miles driven, as well as the starting point and destination of the trip. 

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Needless to say, this method is unreliable and hinders employee productivity because it requires them to manually record all the trip details. As a result, the records can be intentionally inflated to increase reimbursements, or prone to human error. 

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In addition to that, paper logs can’t be easily searched meaning that specific entries can be hard to locate. 

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Paper logs are easily damaged, while the handwriting can be illegible. 

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All this makes the audit process long and complicated. 

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The only pro of this method is its simplicity - everybody’s familiar with paper logs and you don’t have to onboard your employees additionally. 

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Excel logs 

Using Excel spreadsheets somewhat updates the process of capturing and recording mileage logs. Still, the main issues that were common for paper logs persist. 

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Entries can be easily searched, you don’t have to worry about deciphering the bad handwriting, and there’s no danger that logs will be lost. 

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But, on the other hand, this method is equally time-consuming and allows for human error or mileage estimates. 

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Mileage tracking apps

A mileage tracker eliminates all the issues that plague paper or Excel logs. 

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If you opt for a solution like Timeero, you can rest assured that it will:

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- Accurately track mileage 

- Eliminate self-reporting

- Prevent (over)guesstimates

- Eliminates the need for manual data entry. 

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The two cons of this method are potential privacy concerns and employee trust issues if not implemented properly, and we’ll cover them later in the text.

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To illustrate the importance of implementing a mileage tracker app, we’ll mention companies with huge fleets, like UPS or DHL as they understand that cutting mileage and fuel costs will heavily impact their bottom line. 

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That is why they use different methods for preventing lost motion. UPS drivers, for example, are advised to avoid left-hand turns whenever possible. With this simple, tweak the company manifest to save approximately 10 million gallons of gas annually. And such a smart and precisely calculated approach is possible only with the help of software that monitors every vehicle and comes up with the most efficient trajectory based on real-time traffic conditions.

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But if you’re running a construction, home health care, retail, manufacturing, or field service company, you don’t need an intricate, robust, and expensive solution. Timeero offers exactly the features you need to stay on top of your expenses and allows you to get the most bang for your buck. 

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What Features a Top Mileage Tracking App Needs To Have

There are different kinds of mileage tracking apps, and it can be a problem to pick one that best fits your needs. 

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While pricing can be a big deciding factor, there are other, important things to consider. 

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Here’s what you should pay attention to when you’re shopping for a mileage tracker. (Some of these are essential features every mileage tracking app should have, while others are nice additions):  

Tracking 

It’s an essential feature, but since not all mileage tracking apps are the same, you should know what to look for. 

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To make your employees’ lives easier, it’s best to opt for a mileage tracker that will track every drive in real-time, record the breadcrumb trail path using GPS, and capture the exact time of each trip.

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This way, there’s no room for padding mileage claims as all your employees’ movements are accurately recorded and transparent. 

Categorizing trips based on their purpose

Classifying the purpose of every trip is another must-have feature because it will save you a lot of time when it comes to tax deductions. 

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Since most people use their vehicles for both personal and business-related purposes, the option that allows you to label each drive accordingly is more than necessary. 

Traffic and fuel management

To additionally optimize trips and routes, some apps also track the speed and tell you how long an employee spent at a particular road junction. By analyzing this kind of data, it’s possible to determine an alternative route, i.e. avoid left-hand turns, and optimize fuel economy.

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Integration with a third-party accounting app

If you opt for a mileage tracker that integrates with third-party accounting or payroll applications, you’ll be able to easily push your mileage/time entries and reimbursements into the one you use. 

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This feature will additionally simplify the entire reimbursement process and ensure that you don’t accidentally pay less or more on the account of mileage expenses. 

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Geofencing

While an automatic mileage tracker seems like a great idea, there are some downsides to this functionality. For example, it tracks miles in the background whenever it detects that you’re moving at a certain speed. 

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This way, your cab drives or those when you were just a passenger might end up in your mileage log. Timeero’s Geofencing feature prevents this as it notifies your employees or you to start tracking mileage. 

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When Should an Employer Reimburse for Mileage? 

The first thing to mention when discussing mileage reimbursement policies is that there’s no federal law that requires employers to reimburse employees when they’re using their personal vehicles for business-related purposes. 

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However, what federal law does require is for all employees to get at least the minimum federal wage. In case that an employees’ work-related mileage or vehicle expenses cause their wage to fall below that minimum, employers that fail to reimburse them can be subject to penalties and lawsuits. 

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It’s worth noting that in some states, such as California, Illinois, and Massachusetts,  there are labor codes according to which employers are required to reimburse all work-related expenses. 

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When it comes to expenses related to traveling to and from work, these aren’t tax-deductible, even if your employees or you live far from the office. According to the IRS, where you live is your personal choice, and therefore it’s considered a personal expense. 

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To find more about the best practices, tips, and methods for calculating employee mileage reimbursement, check out our guide that covers the topic in great detail!

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All this brings us to an important question: 

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Should you reimburse mileage if you don’t have to?

Even outside employee-friendly states that we mentioned above, many employers decide to reimburse employees for business-related expenses although the law doesn’t bind them to do so. 

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The explanation for this is pretty straightforward - they want to be fair to their employees and ensure that their workforce gets the entire salary stipulated in the contract. Even if these business expenses don’t reduce their compensation below the minimum wage level, fuel and other travel costs eat into their take-home pay. 

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If you pay your employees properly, they will be happy and motivated, which will, in turn, reduce your turnover rate and improve productivity. This perk will show your employees that you value and respect them, and that’s a worthwhile investment that will definitely pay off. 

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Another reason why you should decide to reimburse mileage is because that way you’ll make your benefits package competitive and help you to attract and keep top talent. 

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Employee Mileage Tracking and Expenses Management

To better illustrate the importance of mileage tracking and expenses management, it’s crucial to distinguish between companies that offer transportation of passengers and goods as their main service such as Uber, Lift, or DHL, and medical, real estate, construction, or cleaning businesses. 

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The latter group has to carefully monitor mileage, and although it does constitute a large portion of their expenses, it’s not the only one. 

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That’s why opting for a mileage tracker with additional features that will facilitate expenses management and allow you to cut costs, optimize your spending, and always be in the know regarding the performance of your entire team. 

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Timeero, for example, comes with a set of features suitable for tracking employee hours, mileage, and location, GPS tracking, scheduling, and an Electronic Visit Verification (EVV) system. 

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Having all these metrics in the same place will allow you to keep an eye on your business expenses, stay IRS and EVV-compliant, and prevent potential fraud. 

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How to Track Mileage Without Invading Employee Privacy? 

As employee privacy is a delicate matter, it’s important to take it into consideration when implementing a mileage tracker. 

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The Global Positioning System (GPS) has become an indispensable part of every accurate and precise mileage tracking app. 

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With it, you can be sure your employees won’t take longer routes, run personal errands while at work, or inflate their mileage. Plus, these records are good enough for the IRS.

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Finally, another benefit of GPS is that it uses the existing hardware in mobile phones, which will save you some money.  All you have to do is download a mileage tracker such as Timeero, configure it, and that’s it. 

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Does all this mean that employees have a reason to worry about their privacy?

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Timeero, as we’ve already mentioned, captures mileage and has access to the location only when the employee clocks in and stops tracking when they clock out. This practically means that there are no concerns about the privacy issues whatsoever, as the app is only used when employees are at work. Moreover, they have to activate the tracking themselves when they clock in so they will be aware that the tracker is on for the purpose of monitoring mileage. 

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The best way to ensure your employees are on board with mileage tracking and using GPS that will monitor their business trips is by explaining that this will result in fair mileage reimbursement of their business travel expenses. Also, when they realize that you won’t be tracking them after hours, they will be more likely to support this system. 

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How to Set Up a Mileage Tracking App?

If you opt for a mileage tracker like Timeero, you will facilitate the entire time, mileage, and expense tracking process. 

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It will enable you to:

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- always know where your employees are, how long they worked, and how many miles they traveled 

- run payroll reports quickly and easily 

- monitor mileage, time worked, schedules, and expenses in one place

- track time and mileage precisely using GPS. 

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It’s easy to use and your employees only have to download the Timeero Android or iOS app. Tracking starts when the employee clocks in and stops when they clock out. This means that only the distance they cover for business purposes is covered, as well as that their privacy is protected. 

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We should highlight that “always” doesn’t mean that the app will track mileage 24/7, but only when the employee clocks in. 

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Running Mileage Reports

Timeero allows you to run mileage reports and easily categorize them by the following parameters: 

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- Employee

- Job

- Date range

- Totals only. 

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This way, you can have a detailed and granular insight into how many miles a particular employee traveled, how many regular hours they clocked in, how many overtime hours they worked, and total hours worked within a specified time range.

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Besides that, the report also shows the regular pay, overtime cost, total cost, and total mileage cost for each employee within a specified time range. 

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Using the Reports feature, you can control your expenses without having to perform complex calculations for each employee individually. 

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Finally, once you generate a report, you can export it to the PDF or Excel format and print it. 

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Or you can use one of the existing payroll and accounting integrations and push your report directly to QuickBooks, Gusto, Paychex, ADP, or Xero, where it will be processed. 

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Are you ready to embrace an automated mileage system?

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Paper and Excel logs belong in the past. 

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Yes, they are affordable, easy to use, and require no particular training, but their downsides outweigh the positives. In other words, if you stick to this method of tracking mileage, you practically rely on self-reporting and inaccurate records, thus risking fraud, inflated numbers, non-compliant logs, and exaggerated expenses. 

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With a mileage tracker, you can optimize the reimbursement process, ensure compliance with the IRS mandate, reduce costs, and improve the overall productivity of your business.