When do employers have to pay mileage

However, if an employee makes a business trip on the way home the portion of mileage above the distance from office to home should be reimbursed. Of course, with many people working remotely, a commute may no longer factor in to their mileage.

Businesses and independent contractors may claim mileage as a deductible business expense. However, for tax years , employees may not deduct business mileage or business expenses on their tax returns. In the past, many employers relied on this deduction as a reason not to reimburse employees for mileage.

But in the wake of the tax reform, it is imperative that employers remember that their workers cannot write off mileage. An up-to-date mileage log is necessary in order to demonstrate business use of the vehicle. Mileage reporting can become an Achilles heel, however, if a process does not exist to discourage employees from reporting extra mileage to increase their reimbursement amount.

A contemporaneous mileage log is best. Dozens of apps exist that record mileage in real time using GPS technology in the employee's mobile device. It is important to choose an app that protects privacy by keeping a wall between the contemporaneous mileage tracking and the periodic mileage reports that go to the employer for reimbursement. Our app, mLog , is a hands-free, accurate mileage tracker that protects employee privacy and is suited for large and small organizations.

In most cases a fair rate is not a standardized rate such as the IRS rate. While the IRS rate is most common for reimbursements, it is often not a fair rate for an entire organization to use. This is because the IRS rate reflects the national average cost of owning and operating a vehicle per mile — based on last year's costs. Because some parts of the country are far more expensive than others, and because different workers drive different amounts, a standardized mileage rate often creates inequalities when used for reimbursements.

This situation has been complicated by the pandemic-related reduction in business travel. Unless all of an organization's employees who receive a mileage reimbursement drive similar amounts in regions with comparable driving costs, using a standardized mileage rate will introduce inequities between high-mileage and low-mileage drivers and between drivers in different regions.

The larger and more widespread a company is, greater the variety of business travel costs for employees. Reimbursements can get pretty complicated in this way. It is also important to know that low-mileage drivers — and there are many due to COVID — often cannot recoup all of their business-related vehicle expenses because they cannot drive enough miles to deliver a sufficient reimbursement amount. Lisa McQuerrey has been a business writer since In , she launched a full-service marketing and communications firm.

McQuerrey's work has garnered awards from the U. She is also the author of several nonfiction trade publications, and, in , had her first young-adult novel published by Glass Page Books. Small Business Managing Employees Employment. By Lisa McQuerrey. Company Vehicle Use An employee who operates a company vehicle for business use is typically reimbursed in cash for money he pays out of pocket toward fuel expenses.

Personal Vehicle Use An employee who uses a personal vehicle for business purposes and is not reimbursed for mileage can take the tax deduction himself, as long as he meets certain criteria. Business Reimbursement Taxes Many employees negotiate mileage reimbursement as part of their employment packages.

Learn the difference between the two and why the proper designation matters. Log in. Get started. Small Business Tips. Marin Perez. Download MileIQ to start tracking your drives Automatic, accurate mileage reports. Get Started. California Mileage Reimbursement Requirement California requires employers to reimburse workers for their business mileage. How to comply with California requirements: Mileage Reimbursement. Employees track their mileage and are reimbursed for the amount they drove at the standard mileage rate.

This is the most common method and considered the easiest. Actual Expense Method. Employees track the actual expenses for their business vehicle use and are reimbursed. This is often very tedious and includes a lot of record-keeping. Lump Sum or Allowance. Employers provide an agreed-upon amount per month. This is often known as a car allowance. Downsides of this include a tax hit for employees and the fact that it's often inefficient.

Is Mileage Reimbursement Taxable Income?