Torben Robertson
12 mins
The Ultimate Guide to Mileage Tracking for 2023
Mileage tracking is the process of maintaining a tally of work miles or business miles, miles driven by employees or freelancers in the pursuit of commerce.
What is mileage tracking?
Mileage tracking is the process of maintaining a tally of work miles or business miles, miles driven by employees or freelancers in the pursuit of commerce.
You can track miles with paper, a mileage logbook, an Excel spreadsheet, a mileage tracking app, or a piece of mileage tracking hardware. All of these methods count as tracking mileage. The most common these days is using a mileage tracking app.
Mileage tracking is done by employees who drive for work and who use their personal vehicles for work. It is also undertaken by the business owners managing these employees. Also, by independent contractors, the self-employed, and freelancers, who want to make deductions at tax time.
Oftentimes, business owners will use hardware trackers in fleet management. That is, when an employer owns or leases a fleet of vehicles, they will install hardware trackers on the vehicles to gather mileage data. (This article, however, uses employee-owned fleets as the main example: that is, we will mainly be discussing situations where employees use their personal vehicles for business, on their employer’s behalf.)
All people who track mileage do so for one main reason, and that is to deduct business mileage expenses from taxes. With that, let’s get into the why of mileage tracking.
Why do you need to keep track of mileage for work?
You need to track mileage for work so that you don’t get taxed for legitimate business driving. If you don’t track mileage for work then the mileage expenses incurred for legitimate business purposes will be treated like tax. Without mileage logs every valid reimbursement dollar will be taxed at an employee’s relevant income tax rate and the business’s relevant payroll tax rate.
Should I track business miles for tax purposes?
Yes, absolutely you should. Tax deductions are available for the self-employed, and for employees and businesses, who track mileage for work. No matter who you are, you stand to save a lot of money if you drive regularly for business.
Even at relatively low income and payroll tax rates, you could be saving 30% of the total reimbursement sum. This sum will be equal to the expenses for a given sum. So let’s say your teammate got $600 in reimbursement one month, taxes will knock that back nearly $200 to an actual car allowance of $400. But just by tracking mileage properly, you regain that sum.
Those are the stakes of business mileage tracking. Cardata always advises you to track mileage, whether you use our software to do it or not.
Who needs to track mileage for work?
Anyone making business trips in their personal vehicle needs to track mileage for work.
Employees need to track their mileage for work so they can get their business-related car expenses reimbursed. Whenever they use their personal car for business-related travel, they should track mileage for their own sake. Even if your employer doesn’t offer a car allowance or mileage reimbursement, employees can still deduct their work mileage from their taxes and at least recoup the income tax portion at year-end.
Employers who run any kind of car allowance program or mileage reimbursement program within their company also need to keep track of mileage.
There exist several different kinds of mileage reimbursement programs, like:
– FAVR
No matter which one you run, you need to track mileage for the driving expenses incurred during the course of business to be counted as write-offs.
What exactly do you need to track?
Tracking business mileage does not come down to just counting a certain number of miles. Indeed, according to IRS publication 463, you need to track all the following information on your daily business mileage and expense log:
– The date of the trip (e.g. December 6, 2022)
– The destination (e.g. client’s office)
– The business purpose of the trip (e.g. do a sales presentation)
– The starting odometer reading (e.g. 42,569 miles)
– The ending odometer reading and (42,069 miles)
– The miles of the trip (e.g. 15)
– Any additional expenses like gas, oil, tolls, etc. (e.g. bridge toll)
– The amount of those expenses ($3)
– Weekly totals (50 miles)
– Year to date totals (2,406 miles)
So all of that information needs to be captured in order for mileage tracking to be considered done properly. That is, for the Internal Revenue Service to be satisfied if they ever have questions for you.
You see, it’s not just a matter of tracking the actual miles, but also of tracking things like the business purpose of the trip so that the actual business expense can be justified. It’s not enough to say that you drove from point A to point B, but you need to also identify why you went there, for example.
All kinds of mileage tracking systems, whether they are iOS or Android apps, whether paper mileage logbooks, capture the same sort of information. But GPS technology tends to rule out the need for odometer readings; because if you have a visual overview of where a certain car went, then the mileage itself is justified in that manner.
Think about it: if you don’t have a GPS app on, you need the odometer readings in place of the route, because you can take many routes to the same place. In this case, it is likely that drivers will be tempted to exaggerate, or even that they will make errors. So a mileage tracker is essentially a replacement for a paper mileage logbook, whether it is hardware or software, because it captures the exact route someone went, with a fixed and followed route.
Although it replaces the necessity of recording odometer readings, a mileage tracker does not however replace the necessity that you record the business purpose of a trip. You still need to state why you went to a certain place. You need to write down the address of the commercial destination and why you went there. The best mileage tracking apps will implement easy ways for drivers to record this information, including saved stops and saved business purposes.
How to keep track of mileage for work?
You can keep track of mileage on paper or Excel mileage logs, by using iOS or Android mileage tracker apps, or by using hardware trackers.
How do you keep track of mileage for work?
1. Mileage logs
2. Hardware trackers
3. Mileage tracker apps
Mileage logs: Can you keep track of mileage manually?
If you do want to log your mileage manually, you need to do this for every trip that you take and account for all the details that we itemized above.
Logbooks and Excel spreadsheets are forms of manual mileage logging. Manual mileage logging is slower than automatic mileage capture with GPS apps. However, manual mileage logs are still acceptable forms of business mileage justification.
What not to do: Google Maps
Above, we discussed how you need to record starting and ending odometer readings or use GPS tracking. Copying Google Maps directions onto a spreadsheet is not a substitute for accurate trip tracking. This is a mistake I made when I was a mobile employee. I would do a trip, and then copy the Google Maps directions onto a spreadsheet, where I would also record the business purpose of the trip.
But neither Google Maps nor other navigation tools like Waze store your driving history. They just show you where to go, not where you went. A mileage tracking app is integrated and specialized. It records your trip, plus other details specifically relevant to business driving. And mileage tracking spreadsheets use odometer readings to guarantee that you went a certain distance.
Google Maps could suggest any number of different routes based on traffic conditions. When you open up the link to the Maps route again, it might show something else than what you drove. So make sure to provide odometer readings if you’re doing manual mileage tracking, or instead, use a GPS tracking app!
Manual mileage logging wastes time
Using an excel spreadsheet or a paper logbook can cost drivers a full 40-hour workweek of time, every year. If you want to read about how much time you lose doing manual mileage logging, check out this article next:
Save drivers a week of work per year with a mileage app
Hardware trackers:
Secondly, you can buy hardware that rides along in employee vehicles and captures mileage for upload into a mileage reimbursement software tool. These pieces of hardware can cost anywhere between $20 and $200.
Hardware trackers may save battery drain but can be lost or stolen easily. They are an added business expense that the company must incur before sending drivers out on the road. We hear from clients about how frustrating it is when a driver departs the company and takes the $200 hardware tracker with them.
Hardware is a form of automatic mileage tracking. It can connect with a mileage reimbursement dashboard to provide the data needed for running mileage reimbursement programs. It is arguably better than manual mileage logging because it doesn’t waste absurd amounts of time; however, the expense of losing many pieces of hardware often deters our clients from pursuing this avenue.
Mileage tracking apps: the easiest way to track mileage
Automatic mileage trackers are mobile apps that operate on employee phones, iPhone or Android, and track business miles when they’re driving for work. They capture all the information that the IRS needs to know, so companies can reimburse employee mileage tax-free.
These apps fall into the category of expense tracking software.
What app is the best to track mileage for work?
There are two kinds of mileage tracking applications. Personal mileage apps for contractors, freelancers, etc., and business mileage tracking apps for companies with employees—SMBs and enterprises.
There are personal mileage apps.
There are enterprise mileage trackers like ours, Cardata Mobile.
If you want to run a FAVR program, or other mileage reimbursement program for multiple drivers, you need the latter.
If you are a rideshare driver for Lyft or Uber, or a Doordash delivery driver, i.e an independent contractor; or a sole proprietor or small business owner, you can use the former, a personal mileage app like MileIQ. These apps will store important data for freelancers to use in their tax calculations
You can download many of these apps from the Apple App Store or Google Play store. Some companies even have a free version of their app, so you can get started right away.
What’s the best app for tracking SMB and enterprise business mileage?
The best mileage tracker app is Cardata Mobile by Cardata.
You can read reviews of Cardata’s mileage tracking app on G2 and compare it to others: https://www.g2.com/products/cardata/reviews
Top 5 features of mileage tracking apps
Apps track miles, not people. Make sure your team has a tool that only requires them to show their business miles.
- Exclude commuting mileage
It’s not generally allowed to be reimbursed tax-free. The right app will allow you to set commuting times, outside of work-hours, where trips aren’t captured.
- Real-time GPS tracking and faultless functionality
It’s important that apps capture the actual route you took, without large gaps, and not just directions like Google Maps or Waze.
- Saved stops and business trip purposes
Saved stops allow you to input the business purpose of a trip once, and then just assume it every time your employee revisits that client or commercial destination. You need to record business purposes to be IRS-compliant, but with a top mileage tracking app you don’t need to write it in every time.
- Pairs with mileage reimbursement software
The best mileage apps feed into mileage reimbursement software dashboards, where admins can see expense reports and otherwise run their vehicle reimbursement program. These secondary pieces of software show mileage reports, allow for payment processing, let you add and remove drivers from your program, and more.
Bonus feature:
- Backed by great customer support
If you have an enterprise or SMB business mileage tracker, you’ll want great customer support backing it up! Whether that’s a help library or a person to call, ensure that someone has your back while your miles are being tracked.
When and where do you need to track mileage
You need to track mileage whenever you drive for business.
Cardata has experience in the US and Canada, although other countries like the UK also require verification for car expenses and mileage deductions incurred during the business use of a personal vehicle.
Conclusion: how does mileage tracking relate to mileage reimbursement programs?
Mileage reimbursement programs are ways to reimburse your team for the business use of their personal vehicles.
Whether you have a simple Cents per Mile program that pays the IRS standard mileage rate; or whether you have a complex and granular Fixed and Variable Rate FAVR program, you need a compliant mileage recording method.
Mileage tracking is an integral part of these programs. You need data to justify the reimbursements as legitimate, and that is exactly what a mileage tracking app provides.
If you want to see Cardata’s mileage tracking app in action, visit this page:
Book a call to learn our pricing today.
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