Mileage reimbursement is a mutually beneficial opportunity to receive tax reductions for both the employee and the employer. The IRS requires that the amounts paid must be substantiated by the employee according to the requirements of the Internal Revenue Code.
Why do businesses need an accountable expense plan? Thanks for downloading! If the requested file does not load in a new window, click here. Think of this blog as a helpful intro, but when in doubt, ask an accounting or tax professional for help. Before you start reimbursing your employees for business expenses, you should first determine whether you have an accountable plan set up for the reimbursement arrangement.
An accountable plan is a reimbursement or expense allowance arrangement. A business connection. Returning excess amounts. Here are additional examples of expenses you might be able to deduct when you travel away from home for business purposes:. Customer visits - Driving to meet a customer off-site is likely deductible. Errands and supplies - Driving to pick up supplies for your office is an often overlooked mileage deduction. Business meals and entertainment - Believe it or not, you may be able to deduct mileage for trips you or your employee take to meet clients for coffee, drinks, or dinner.
Conventions - Travel expenses for conventions are deductible if your attendance benefits your trade or business. You can easily keep track of mileage with an expense-tracking program. Within these programs, you can set your reimbursement rate and then calculate how much you are owed based on the mileage entered.
Most employers include reimbursement on the next paycheck. You can track your mileage reimbursement by following these steps:. You might ask your employer for mileage reimbursement when first negotiating your compensation package after accepting a new job. Consider these tips as you prepare for a discussion about mileage reimbursement:. Doing your research ahead of time can help you begin the conversation and have specific talking points.
Calculate how much this translates into cost. After you have a set number of miles that you intend to drive, compare this to the average cost of fuel. Complete your calculation. Factor in the cost of maintenance and repairs, and add it to the total. Provide these numbers to your employer to support your request.
Discuss available reimbursement rates. Ultimately, it is up to your employer to set the rate they feel the most comfortable with.
However, you can enter the conversation prepared by looking up standard federal rates beforehand. Discuss a record-keeping process. It will help you and your employer track mileage if you plan a record-keeping process before traveling. Find jobs. In this situation, you can't use the standard mileage rate. This is because it's meant to cover both the cost of owning and operating a vehicle, but in this case you only operate it. Your company has instead set a rate of for example 21 cents per mile.
So here we can see that owning the car you drive for business results in higher reimbursement—but you also have higher costs, especially when you include the car's depreciation. Knowing the portion of a car's use that is for business not personal use is useful for figuring out how much you can claim for depreciation and other costs of operating that vehicle.
Let's go through a quick scenario:. You've driven personal miles in a given period. During the same period, you've also logged business trips that totaled business miles. At one time, , miles was considered a long life for a vehicle.
Today, that same distance is considered mid-life for most cars. Updated technology means cars run more reliably and, when properly maintained, can go years without requiring major repairs or replacements. Maintenance is king. Regular maintenance is key to keeping a vehicle running well..
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