What Are the Mileage Reimbursement Rules?

If you are a businessman, a mileage reimbursement program can be very crucial and critical to the success of your business. It is necessary for you to be aware of these rules and best practices. I am going to tell you about the best practices for both the employers and employees.

What are the IRS standard mileage rates?

The IRS sets the rate for each mileage rates every year. The mileage rates for 2019 are given as:

  • 58 cents per business mile, up 1 cent from 2017
  • 20 cents per mile for medical or moving, up 1 cent from 2017
  • 14 cents for charitable reasons. This rate has remained steady for years.

If you are a self-employ, then you can deduct these costs. Keep in mind that the W2 workers cannot avail the deduction due to the new tax laws in effect.

What are the federal mileage reimbursement laws?

Here are some key takeaways in the federal mileage reimbursement laws:

Specifically, here are some key takeaways:

  • There is no such rule which forces private business to reimburse mileage.
  • Labour laws can force a mileage reimbursement.
  • Some states, like California and Massachusetts, require reimbursements.
  • It is very easy to set a rate using the standard mileage rate.
  • If an employee receives a tax-free mileage reimbursement, then the employee can't claim a mileage deduction.
  • If there is not an accountable plan, the mileage reimbursement counts as taxable wages.

Is mileage reimbursement required by law?

Companies don't have to pay any required mileage reimbursement rates. There are no such rules set by the IRS for mileage reimbursement.

Some states do have a mileage reimbursement rate rule like California and Massachusetts.

Furthermore, w2 workers can no longer deduct the non-reimbursed mileage.

What does the mileage reimbursement include?

A mileage reimbursement covers the expenses of operating a vehicle which is used for business purposes. This also covers the costs like gasoline, wear-and-tear and many more. Every company has its own policy regarding the expenses of a vehicle like tolls and parking.

Can I get a mileage reimbursement?

Your employer is not bounded to give you a mileage reimbursement, but the business you are doing may attract talent. So, it is not a big deal to ask.

Is mileage reimbursement taxable income?

Offering a mileage reimbursement may have an impact on an employee's taxable income. The tax has an impact that varies depending on whether it is accountable or not. An accountable plan is actually an expense allowance granted for reimbursement that has the following requirements:

  • Has a business connection
  • Requires substantiation
  • The employee returns excess amounts within a reasonable time.

Your employees don't have to pay income taxes if you have an accountable plan.

IRS gas mileage reimbursement rate

There is not a standard reimbursement rate for the companies, because the companies can set their own reimbursement rate. Some companies will help you out in paying for the employee mileage. This can be providing the employees with a car or offering a gas allowance. This can also include reimbursement for the mileage of the company. As I said earlier, many companies will set the reimbursement rate to the rate set by the IRS.

Reimbursement expense reports: How to calculate mileage reimbursement

If you are an employee who is looking to get money for company mileage, then you have to submit some sort of mileage log.

The specificity of this mileage log may vary from company to company. Some organizations may only require their employees to submit the mileage for each of the work trips. Other companies, such as publicity-traded need strick record keeping. They may include the reason for the trip, the names of the clients and even the make and model of the vehicle.

If you are thinking of acquiring this reimbursement, it is recommended to have detailed logs of the mileage. If you don't keep the detailed records, you may get rejected or even your employer can take disciplinary actions against you if there are any fraudulent claims found.