It’s not too common for employers to reimburse an employee more than the IRS suggested rate but it does happen. Some employers reimburse more because they don’t feel that the IRS rate is enough. Once, an business owner told me that he didn’t know the rate so he wrote a check for $100 each week.
In either of these scenarios the employee receives more than the IRS mileage rate. While this is fine, the IRS has rules about excess mileage payments:
Any amount reimbursed over the IRS standard mileage rate is technically wages. Employees must claim this at tax time.
“If you were reimbursed for travel or transportation under an accountable plan, but at a per diem or mileage rate that exceeds the Federal rate, the excess should be included in the wages on your Form W-2.” IRS.gov
Example of Excess Mileage Calculation
As an example, if an employer chooses to pay 60 cents per mile and the employee drove 1000 miles in one year, that employee would have to claim the excess of 6 cents for every mile. So she would have to claim 6000 cents (or 60 dollars) on her taxes in addition to her regular wages.
If employers pay employees less than the standard rate, employees can deduct that amount on their taxes.
Track Mileage to Avoid Over-payments
With Timesheets.com, employees can track their mileage against the current mileage rate so that exact payments can be issued and over-payments avoided.
Let us help you start tracking mileage!
11 comments
[…] Employers don’t have to reimburse employees for mileage, although it is generally good practice. The IRS rate is both a guide for employers and the rate employees can use to claim mileage deductions on their taxes when employers don’t reimburse. It is important to note that while employers don’t have to reimburse this rate exactly, if they reimburse over the rate, then employees must report that excess reimbursment as wages. […]
[…] A company can reimburse its employees whatever it wants – from zero cents per mile to over the IRS maximum. There is no law mandating how much or how little to reimburse employees. Even if you don’t reimburse your employees, they can recover the costs on their taxes. Whatever amount an employer does not reimburse, employees can deduct on their taxes. If employers reimburse more, however, which is perfectly acceptable, employees have to claim this mileage excess as wages on their taxes. […]
[…] important to know, however, that the IRS counts excess mileage reimbursement as wages and so the employee would need to claim that excess on his […]
If a 501(c)3 charitable agency pays more that the 14 cents per mi, is that also taxable income?
I have not read anything on the IRS.gov pages that would lead me to believe otherwise, but if you’re not sure, you could run it by your tax specialist.
Can an employer cap the amount of miles driven? So if an employee drives 400 miles that month at a rate of 30 cents per mile but their cap for the month was 300, can the employer decide not to pay over the 300 miles? Thus reducing the miles driven by 100?
Hi Sue, It is perfectly fine for an employer to do that. When it comes to reimbursing employees for mileage, employers can pretty much do what they want. Now, whether an employee wants to agree to it is another story. Employees are always welcome to find a new job if they don’t like the arrangement.
Take a look at this post for the rules: http://blog.timesheets.com/2014/11/19/paying-employees-more-or-less-than-the-standard-mileage-rate/
If an employer decides to reimburse more than the standard mileage rate, is it up to the employee or the employer to make sure that the excess reimbursement is accounted for at tax time?
Zach,
Since the excess is counted as wages, the employee would need to report that to the IRS as wages.
Does this taxed income also apply to a minister in regards to reimbursed mileage?
Is reimbursed mileage taxable?