My company utilizes sales reps that drive to prospective customers and charge in their mileage. I'm looking for a procedure in which we can properly reimburse the employees for their out of pocket expense while curbing abusive charges. We asked them to provide print out from a mapping program of their to/from trips and the backlash has been fierce with the complaints that it takes too long to do. Any other suggestions? Also is anyone familiar with what the IRS considers as adequate documentation for mileage reimburesment
Employee Mileage Expense Reimbursement
Answers
Might I suggest that you do an ROI analysis on leased vehicles and company gas cards for your sales folks? This immediately solves the "too much time to track" issue. You might also consider if you really want your sales folks showing up in 1968 VW beetles to your customers. If you lease the vehicles, you control that as well. I hope you've also got the company providing auto insurance on these vehicles even though they're owned by the sales folks, because in reality that's the way the hammer will swing in jurisdictions I'm aware of, if they crash the car on company time. Naturally, your safety folks also have complete access to driving records and history on all driving employees...right?
Sorry I haven't answered your IRS question because I think there are more important issues at stake.
Pete
You haven't indicated size of company, method used for expense reporting, etc. However, we had a similar situation (small company, <75 employees, 10-15 folks travelling). We keep a map on file for each traveler from their home to the airport. Otherwise, we look for reasonableness on the mileage reported (based on the to-from - required). We also have guidelines in our travel policy for flying vs using your own car vs. renting. We handle the abusers separately; we have a very general policy that essentially says that we expect folks to treat the Company's money the same way they would treat their own - or their parents! It is not efficient or effective to design policies, forms, and procedures to handle the one or two employees who will abuse or push the line on whatever policy you put in place. As far as IRS requirements, you can find those online (Publication 463) - but we ask employees to show the date, # miles, to and from, and customers visited. Their signature certifies that it is a valid expense. Abusers can also be reviewed/documented by tracking - either total travel $ by traveler, or as a % of their sales, number of assigned customers, etc. Give them a spiff on this measure and see if their habits change.
One expectation that I have noticed among our sale people/ travellers is that they should be reimbursed at the current IRS published rate. I point out to them that this is not a recommended rate, but simply a rate that the IRS states will not be deemed to have any income element to be taxed. For those who clock up significant mileage, a lower than IRS rate still covers their costs and, I suspect, leaves them with something in their pocket after expenses.
I have seen that happen before.
We impose the same requirement on all of our staff who travel. They map out the trips and that backs up the calculation of the mileage and cost. We have never had to produce our documentation to the IRS but as a Federal Contractor we produce this documentation and it was found to be sufficient.
I think your sales people and your company are protected by doing this. Perhaps the "sales job" to them is that it mitigates some audit
Hope this is helpful.
Most companies follow the IRS guidelines. However, with the steep jump in gas prices, and the cost of repairs skyrocketing, this number is inadequate. If a salesman is averaging 30,000 miles per year, in all likelyhood the car should be repaced every three years at a minimum. As an owner of the company, you should know the areas your salesmen are traveling. A reasonableness check should be sufficient. No one is getting rich by padding a few miles on the expense report. The suggestion of leased vehicles and gas cards is a good one if you have a major distrust of your employees. Look out though, you will be in a significant increase in expense, (monthly expense, sales
Using my example of 30,000 miles, a person would be reimbursed ($15,000) for the use of the car. Assuming a mid-size auto costs $25,000, and a residual value of $5,000 (120,000 miles 30,000 of which would be personal) the car would depreciate at the rate of $6,700 a year, gas costs would be approximately (30,000/20 *3.50), oil maintainance (30,000 /3000 * $50) overall maintenance (tires, brakes inspections, general overall maintenance inspections ($800, $400, $100, $500) and auto insurance ($1,500), the minimimum overall expense would be $15,750. If there is an accident, the cost dramatically incresase. Nickel and diming your employees is a quick way of losing them as soon as another opportunity arises.
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Accounting