How to Calculate Mileage Reimbursement
Mileage reimbursement is an essential aspect of conducting business, especially when employees are required to travel for work purposes using their personal vehicles. In such scenarios, companies need an efficient method to calculate and compensate their employees for their travel expenses. This article will guide you through the process of calculating mileage reimbursement.
1. Determine the reimbursement rate
The first step to calculating mileage reimbursement is to establish the rate at which your company will reimburse employees for their mileage. In the United States, the Internal Revenue Service (IRS) offers a standard mileage rate that is updated annually. For 2021, this rate is set at 56 cents per mile driven for business purposes. You can decide to use this standard rate or establish a custom rate tailored to your company’s specific needs.
2. Track the distance traveled
Employees should keep a record of the total miles traveled for work purposes. They must track the starting point and end point of each trip and provide accurate information about the total distance covered during business-related activities.
There are multiple methods for tracking mileage, including manual logs, smartphone applications, or using GPS devices that automatically track and record distances. Be sure to choose a reliable method that suits your company’s needs and provides accurate information.
3. Calculate reimbursement amount
After tracking mileage, employees should refer to the established reimbursement rate from step one and multiply it by the total number of miles they have driven during work-related activities.
Reimbursement amount = Total miles traveled x Reimbursement rate
For example, let’s assume an employee has driven 100 miles during a business trip, and your company is using the IRS standard mileage rate of 56 cents per mile.
Reimbursement amount = 100 miles x $0.56 = $56
4. Submit reimbursement request
Once employees have calculated their total mileage reimbursement, they should submit a formal request to your company’s human resources or finance department. This request should include the date(s) of travel, purpose of the trip, and total miles driven, along with the reimbursement
rate and the calculated amount to be reimbursed.
5. Process and approve the request
Finally, your company is responsible for reviewing and approving mileage reimbursement requests. It is essential to verify that employees have provided accurate information before processing their requests. Establish a standard approval process and timeline to ensure reimbursements are fair and efficacious.
Calculating mileage reimbursement is a crucial element of conducting business travel. By determining a reimbursement rate, tracking distance traveled, calculating expenses, submitting requests, and processing reimbursements, your company can streamline this process while ensuring fairness for employees who use their personal vehicles for work purposes.