How Much To Reimburse Employees For Mileage
The IRS sets mileage rates for employees who operate their own personal vehicles at work (they also set rates for charitable, medical, and moving purposes).
What sometimes confuses people about this is that the IRS sets a mileage rate, but does not mandate reimbursement by the employer. Many employers think they have to reimburse mileage but, in reality, they don’t.
The IRS rate is a guideline for employers and a tax deduction opportunity for employees.
A company can reimburse its employees whatever it wants – from zero cents per mile to well over the IRS maximum. There is no law mandating how much or how little to reimburse employees. But this doesn’t mean that the employee might get short changed. Whatever amount an employer does not reimburse, employees can deduct on their taxes.
Nevertheless, if employers choose not to reimburse mileage, it might not be too easy to get employees to run their errands!
While businesses can reimburse employees any rate of their own choosing, a BLR Survey found that 73% of respondents (144 in total) actually reimbursed employees the max IRS rate.
IRS Standard Mileage Rate for 2012
The standard mileage rate for the first half of 2011 was .51 cents/mile. Due to increased gas prices, however, the IRS increased the rate slightly to 55.5 cents/mile.
Use Expense Sheets to Calculate Mileage
Reimbursing mileage with expense software like Timesheets.com allows you to use whatever rate you like.
The administrator sets the rate, employees enter their miles, and the software calculates the total. Employees and Administrators can both run reports at the end of the year for totals.
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I run a pet sitting service and am unclear as to if I only reimburse my employee for mileage between homes or also from her home to the homes we service as well. What do I do?
From my understanding if she has no office other than her house then you would have to pay her from the first house she stops at for the day to the last one. The travel from her house to the first client, and from the last client home is on her. It’s a sticky thing sometimes and to get absolute clarity on the issue for your area it would be best to contact your tax adviser or local state taxation and revenue department. Also many states will have taxation and revenue seminars for small businesses free or low cost.
I have a maid service in Atlanta GA. We reimburse $10 a day for the driver for simplicity.
We do not pay for wear and tear of the car.
You can also go to mapquest and calculate their route. You will see their actual gas cost. If they are leaving from the office you can start calculating there. If they do not have to return to the office at the end of the day, then the calculation stops a the last job of the day.
We have several golf courses and I would like to know how to reimburse an employee who uses their own Golf Cart form location to location. It gets about 30mpg. We reimburse our employees who use their own cars the standard IRS rate. I don’t think we should reimburse a golf cart the same as a car. We don’t have a policy currently in place. Thoughts?
That is an interesting situation. You could ask the same question about employees using the Prius. Electric cars could change the whole reimbursement playing field.
Ultimately, though, what you reimburse is completely up to you. If you don’t wish to reimburse for mileage, you don’t have to. Or if you wish to reimburse less that is your freedom. Your employee can claim the unpaid mileage on his taxes. The only possible caveat is that your employee may not be very happy with you and might leave the company.
If an employer provides a partial reimbursement for mileage to the employees, does that employer also claim that mileage when they do their taxes and do they get the full reimbursement from the IRS?
In other words, is the employer pocketing the difference if they can claim all the employees mileage?
Check with your CPA for full details of business expense deductions.
What is the average reimbursement for employees?
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How often should I reimburse employees for their mileage? Currently it works out to be once a month on average, but occassionally is more often than that. It seems excessive.
My current employer reimburses with bi-weekly payroll. Mileage is included in the payroll check. Mileage is tracked on the timesheets. My previous employer paid out mileage on non payroll weeks as a separate expense check. That system tracked mileage as and expense not as time. in either case it worked out to approximately 26 weeks a year or twice a month.
my employer pays .33 cents per mile i travel for work. The IRS standard is .55. When i file my taxes will i be able to get the difference for miles traveled?
Yes you will!
I work delivering pizza and paid as a tipped delivery driver. Is there a mandatory mileage to be paid to drivers? I’m using my own vehicle.
Angel,
There is no federal law mandating that an employer pay delivery drivers. Many pizza places choose to pay their employees some kind of mileage reimbursement as a benefit but it is not required. You will want to keep very accurate records of your mileage – write down the mileage at the beginning and end of each delivery – and then claim whatever was not reimbursed by your employer at the end of the year.
Is the amount reimbursed for using an employee’s own car considered to be taxable income, and as an employer do I have to include it on my employee’s W2?
It depends on how much you reimburse the employee. If you reimburse up to or below the federal mileage rate, then it is not considered taxable income. If you reimburse above, then it is.
Currently our small company does not offer any reimbursement for mileage. We are growing and now have several locations in the state and our managers have responsibilities to visit each location frequently. If we did institute a mileage reimbursement, is there any difference between who we reimburse (managers vs. front line staff)? At this point, it’s the company culture that believes that if you are salaried and a manager, you are EXPECTED to bear the cost of driving your own vehicle. Also, if we did start expensing miles, do we have any increase in liability for our drivers? Do we NEED to verify valid DL’s and that our employee have valid auto insurance? Thanks for your reply!
Hi Nikki,
Employees and managers alike can claim mileage as a business expense. Whether the employer chooses to reimburse is up to the employer. No person working for a company and driving his/her own vehicle for business purposes should have to bear the cost of gas, wear, and tear.
If you are required to use your own vehicle for work and get reimbursement at the Federal amount, can your employer require you to have a vehicle 5 years or newer or they won’t reimburse? Talking about mileage of 1,000 per week is possible.
Noel,
Remember, employers don’t have to reimburse mileage if they don’t want to. If they don’t, you can deduct the mileage on your taxes. Please read this article: http://blog.timesheets.com/2012/07/03/employees-can-deduct-the-mileage-employers-dont-reimburse/
If your car is old and you do not have good gas mileage, you will be the one losing, and not your employer (or the IRS). i.e. your reimbursement will not go as far.
Now, I can see how your employer would require a newer vehicle for reliability. That is up to the employer’s discretion.
i am employed with an agency for over 14 years. I am getting mileage reimbursement but the agency i work for was my base station (the main office) for fourteen years. Now i was given a new base station which I have no reason to go there for anything. I have to deduct a round trip mileage after each of my visits going to see clients from the new assigned base station which is 22.5 miles. Is this legal to do to an employee.
Technically, the business can choose to reimburse what they choose so it is fine that they use their new base station as a starting point.
In order to know what is accurate for your tax deductions, though, you should write down your odometer reading each time you drive for the company. So if you leave the (old) base station and head out to your jobs, write down the odometer reading from that location and then again when you return to it. Don’t worry about the new base station which you never visit.
If this is how your company wants to calculate it, that’s fine. But for your own purposes, you need to keep track of the actual mileage.
For more information on deducting mileage on your taxes, take a look at this post. http://blog.timesheets.com/2012/07/03/employees-can-deduct-the-mileage-employers-dont-reimburse/
I work for a oilfield service company that charges $2.00 pr mile on my personal car but only reimburses me $0.56 . keeping the other $ 1.44 , is that legal can they do that.
Jack,
I don’t understand.Your company charges you to use your own car? Can you clarify please? Thanks.
I travel from Lafayette la to Venice la on the end of the delta. total round trip is 465 miles for my job… on my service ticket i charge shell oil $2.00 pr mile = $ 930.00 and we get $0.56 pr mile only receiving $260.40……they profit off my truck $670. said it was for insurance purpose but theirs doesn’t kick in till ours is depleted.
Would the mileage deductions (federal tax) be available to all tax-payers? Or, does it only come into play when a tax-payer itemizes?
From the IRS website: “Generally, if you are an employee, to deduct your car expenses including expenses that exceed reimbursement under an accountable plan, you must complete Form 2106 (PDF) or Form 2106-EZ (PDF) and itemize your deductions on Form 1040, Schedule A (PDF).”