By Matthew Betz, Vice President Business Development, Fleet at Motus, LLC
“They say the universe is expanding. That should help with the traffic.” — Steven Wright
Let’s face it, very few people enjoy their daily commute to work. And I think it’s safe to say that nobody enjoys sitting in the bumper-to-bumper traffic that defines the daily commute in most of our large cities. But for the Modern Mobile Worker, there is another question; “Is my commute considered personal miles, or business miles?”
That’s a question that astute fleet professionals should be concerned about as well. Correctly categorizing mileage gives a much clearer picture of business and personal mileage patterns in your fleet. In large fleets, millions of dollars could be at stake, not to mention the risk of IRS audit.
As I talk to fleet managers across the country, it’s surprising how many are looking for some guidance on this issue. Questions regarding what qualifies as a “home office,” IRS commute rules, and how to appropriately charge for commute miles are common. While personal use of a company vehicle has been considered a taxable benefit since 1986, there are still a number of questions regarding commute miles. For that reason, I thought it might be helpful to share one of the best explanations that I have found.
Commute Deduction Guidelines
Each employee is assigned a permanent work location by his or her employer. A permanent work location is defined as the location where that employee performs the majority (more than 50%) of his or her job duties. That location may be identified as one of the following “office types.”
Home Office – This applies to an employee who performs more than 50% of his/her job duties while at home. If that employee must drive from his/her home office location to another work location or to multiple work locations, all mileage recorded is considered business mileage. No commute mileage would apply.
Corporate Office – This applies to an employee who performs more than 50% of his/her job duties while at a specific office location other than his/her home, such as a corporate office building. Travel directly between the employee’s home and that specific office location is considered commute mileage. But if the employee travels form his/her home directly to an alternative business location such as a customer meeting, customer office or airport, then all mileage recorded is considered business mileage. The same rule applies when driving back home from one of these alternate locations.
No Office – This applies to an employee who performs more than 50% of his/her job duties while at various locations. The mileage recorded between his/her home location and the first work location visited that day is considered commute mileage. Additionally, the mileage recorded between the last work location visited that day and his/her home location is also considered commute miles. Exceptions are permitted if the first and/or last location visited is outside of the worker’s metropolitan area. Metropolitan area is typically defined by the employer as a radius of between 10-20 miles from each driver’s home location.
Based on the above definitions, most fleet drivers would be considered “No Office” employees. After all, we don’t typically assign fleet vehicles to drivers that don’t spend at least 50% of their time on the road or in front of customers.
As I mentioned earlier, correctly categorizing drivers, and adjusting your commute policy accordingly, has several benefits. First, it reduces the risk of an IRS audit. And, should you be audited, it reduces the possibility of fines, interest, or back taxes. Also, having an accurate picture of personal and business miles allows you to better determine an accurate personal use charge – and that can save fleets millions of dollars. As always, I welcome your comments, questions, or concerns. I can be reached at email@example.com.