Why Mileage Compliance Can Feel Risky, and How to Fix It

Only 45% of HR, Finance, and Fleet managers say they feel highly confident in their current compliance with IRS regulations around vehicle reimbursements. That means more than half of leaders are unsure if their tax-free business mileage programs are playing by the rules.

When it comes to the IRS, uncertainty isn’t harmless. If your vehicle mileage program falls out of compliance, the consequences can include hefty tax penalties, back payments, and reclassification of reimbursements as taxable income.

But here’s the good news: with the right program structure and tools, compliance doesn’t have to be a source of stress. Let’s break down what’s causing the worry, and how companies can take back control.

Why Compliance Is So Tricky

IRS rules around vehicle reimbursement programs are detailed, and evolving. To qualify as a tax-free accountable plan, a program has to meet several requirements, according to IRS publication 463:

• 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)

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.

Even a small mistake, like missing data points in a mileage log, can push a reimbursement into taxable territory. That’s why manual processes like Excel sheets, handwritten logs, and loose policies don’t cut it anymore.

And yet, a surprising number of businesses still rely on those outdated methods. It’s no wonder confidence is low.

How the Right Program Increases Confidence

The most effective way to improve compliance confidence is to remove the guesswork. Automated mileage tracking tools like Cardata Mobile take the burden off your drivers and admins. 

Trips are logged with GPS, business purposes are assigned, and reports are automated. 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.

That means no more chasing drivers for missing logs, no more trying to decipher odometer scribbles, and no more wondering if you’ve done enough to meet IRS standards.

Compliance Is a Win-Win

Getting compliant isn’t just about avoiding risk. It also makes your program more effective. When your reimbursement model is airtight, you can take full advantage of tax-free options like FAVR. 

That shift saves your company money on payroll taxes and gives drivers more in their take-home pay.

It also builds trust. Employees are more likely to feel supported when they see their reimbursements are based on real data, not flat rates or outdated formulas.

And as your team grows, a compliant program is easier to scale. Instead of manual reviews and policy exceptions, everything is structured, automated, and aligned with IRS rules. That means your confidence stays high even if your headcount rises.

You Don’t Have to Do It Alone

If your team is part of the 55% not feeling confident about compliance, it might be time for a reset. The right partner can help you build a program that’s audit-ready from day one.

Want to take pressure off your team and stop worrying about compliance? Talk to Cardata and see how we make confident mileage programs easy to run, and even easier to trust.

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