Trouble Keeping Track Of Automobile-Related Expenses? There's An App For That

If you provide your employees with company-owned or company-leased vehicles, you know that it is not always easy for your employees to keep track of all of their automobile-related expenses.

To meet Internal Revenue Service (IRS) requirements, employees generally must substantiate the business use of a company-provided vehicle. This means that they must carefully and accurately document where they went, when, for what purpose, and how many miles they drove to get there. This not only can become tedious and burdensome for employees, but also often results in inaccurate records when employees try to come up with complete and detailed records at the end of each tax year. This could be problematic in that the benefit may not qualify for exclusion as a working condition fringe benefit and, consequently, could be taxable in part or in full to the employee.

Fortunately, there may be an easier way to keep track of automobile-related expenses. Mileage tracker apps, such as Mileage Expense Log, TripLog, and MileIQ, may be an easy and efficient way to meet many of the IRS's requirements. Mileage trackers are easily accessible, as they can simply be downloaded on employees' cell phones, and they automatically track, record, and calculate the mileage for each trip that an employee takes. Many of these trackers include additional features, such as the ability to track tolls, parking, and meals, or the option to swipe left or right for personal versus business trips.

Substantiation Is Not Always Required

The Five-Part Exception—No Personal Use Policy

There is an exception to the general rule that requires substantiation. Employees are exempt from substantiating the business use of company-owned or company-leased vehicles if they can meet the following requirements:

The vehicle is owned or leased by the employer and provided solely for business reasons. When not being used, the vehicle is stored on the employer's business premises. No employee using the vehicle lives at the employer's business premises. The employer has a written policy prohibiting personal use of the vehicle. Neither the employee nor anyone associated with the employee used the vehicle for any personal purpose. However, if any of the above requirements are not met, then the employer may have to include the fair market value of the vehicle (plus fuel if paid by the employer) as taxable wages on the employee's Form W-2.

The No Personal Use other than Commuting Rule

In the event the above...