Lots of companies are tracking mileage every day. You’d think they would know all the nuances of this matter. Well, in our experience it’s not always as obvious as it seems.
Let’s see how well you know mileage tracking. Take the quiz:
Why do you need to track mileage in the first place?
a. To be reimbursed
b. For tax deductions
c. For fraud protection
d. To control travel expenses
Answer: Each answer is a reason to track mileage. For small businesses, it helps to keep tabs on expenses and get tax deductions. For larger companies, it helps with fraud protection as well as expense tracking. For employees, it’s nice to be reimbursed, especially when using your own private car.
What counts as a “business purpose”?
a. Commute from home to work
b. Visit to an office supply store
c. Dropping your boss off at a grocery store
d. Visiting your business’ bank or lawyer
Answer: Only b and d are correct answers for this question. You can drive to your accountant, bank, lawyer or even office supply store (that provides you with the business-related goods), and this is considered a sound business purpose. On the other hand, neither your daily commute nor driving your boss to his personal errand qualify as a business purpose.
What information you must record?
a. Date and time of the trip
b. Gas station receipts
c. Route map
d. Total distance travelled during the trip
e. Purpose of the trip
Answer: The IRS requires businesses to keep records of the date(s), distance of each trip, as well as receipts for gas and other expenses. The rest is optional information that can help your organization keep detailed records of business trips.
What is the best way to calculate reimbursement amounts?
a. Using a standard mileage rate
b. The actual cost of the trip
Answer: This is a tricky question. The correct answer is “It depends”. In some cases it’s better to use the standard mileage rate, in some other cases tracking the amounts spent on gas or other travel-related expenses is preferred. Whichever one you choose, be consistent and stay with it for the entire year.
Now you know a bit more about tracking mileage for your business. You can take advantage of one of the numerous mileage tracking solutions that are available to make this task even more organized and seamless.