“Get your facts first, then you can distort them as you please.” – Mark Twain
While I prefer to think that most drivers will do the right thing (assuming they know what that is), it’s clear by talking to fleet managers around the country that there exists little trust that drivers are accurately reporting personal miles of company vehicles. Whether the discrepancy is due to lack of understanding of the difference between commute, personal and business miles – or willful distortion, it is potentially a very expensive aspect of dealing with the Modern Mobile Worker. With the IRS announcing that personal use of company vehicles will be a priority area for audits, the lack of accurate IRS-compliant mileage logs could become a large and costly risk.
Why is the Modern Mobile Worker confused?
To a large degree, it could be because the fleet industry hasn’t agreed on an exact definition of what constitutes a personal mile. There are also questions about what an IRS-compliant mileage log must contain, and who is ultimately responsible for ensuring the driver keeps such a log – the mobile employee, or his/her employer. What we do know, from interviewing fleets around the country, is that drivers and fleets are being audited, and when IRS-compliant logs are not available, drivers and their companies are being fined.
What does this mean for your fleet organization, or your company?
While it is widely believed that the typical mobile employee drives approximately 82%-88% business miles, and 12%-18% personal miles, this could be far from reality. A recent study, using GPS verified mileage, showed an average personal use as high as 41%. In the study, using data from over 100,000 drivers, personal use was 25% when drivers reported mileage manually, but jumped to 41% when GPS verification was used. Whether you believe drivers just don’t know the rules, or you believe drivers are knowingly bending the rules, the discrepancy in reporting can be costly. How much does 15%-20% of your fleet budget represent?
As an informed fleet professional, it’s up to you to decide the best path forward given the unique circumstances in your organization, but it’s probably worth asking a few questions: Is my company looking for cost savings? Are we a company that strives to be compliant in all areas? Do we regularly subsidize benefits for segments of our employee population? Do others in the organization clearly understand what this benefit is costing the company?
Following are a few easy steps to ensuring you are aligned with IRS regulations, company goals and objectives, and best practices:
• Review individual driver commute designations – they could be “Office”, “Home Office” or “No Office” drivers. Understand and communicate the commute rules for each group.
• Develop company expectations and policy based on company goals.
• Ensure each driver has an IRS-compliant mileage log.
• If your drivers are manually recording mileage, consider measuring the difference using technology solutions that can accurately capture mileage.
• If cost savings is a goal, consider charging each driver for the amount of personal miles they drive, instead of a flat charge for every driver. This allows you to recoup the expenses incurred by drivers with high personal use without penalizing those drivers with legitimately low personal use.
Whatever course you ultimately choose to take, there is too much money at stake not to review your company’s approach to personal use of fleet vehicles. And, while the Modern Mobile Worker that drives a lot of personal miles is not going to like paying more for the personal use of the vehicle, it is a fair, defensible approach that most likely fits with your company’s goals and objectives. As always, I welcome your comments, questions, or concerns. I can be reached at [email protected]
By Matthew Betz, Vice President Business Development, Fleet at Motus, LLC
