Some employers demand that workers use their personal vehicles for work-related purposes. The employer is not required to pay for your fuel or cover the costs of maintaining your vehicle. To get a mileage reimbursement, however, many employers let you submit receipts and travel logs. Each business has its own rules that govern how much you receive. However, you can typically anticipate receiving the Internal Revenue Service-approved mileage reimbursement amount for businesses and charities. For federal employees who use personal vehicles to conduct business, the General Services Administration establishes mileage rates.
Employee mileage reimbursement law is not complex
There is no legal requirement that employers provide mileage reimbursement. Many do since it’s a wise strategy for luring and keeping employees. Payments made at the standard Internal Revenue Service rate are not taxable because they do not qualify as income. Due to the reimbursement payments being a deductible business expense, businesses also benefit from tax breaks.
Reimbursement arrangements used by employers should meet three basic criteria. They must be for allowable business expenses, such as travel for work-related purposes. Employee records demonstrating the time, location, and purpose of the travel are required to substantiate claims. And any excess reimbursement should be returned to the employer.
Employers don’t have to pay the IRS recommended rate…
Each year the IRA releases its optional standard mileage rate. The standard mileage rate for using a personal vehicle for work-related purposes in 2020 is 57. 5 cents per mile driven. That’s down 0. 5 cents from 58 cents per mile in 2019.
The optional standard rate is just that: optional. Another strategy is to make it mandatory for staff to record actual travel-related expenses, but this is regarded as being more burdensome for both parties as it makes tax accounting and expense record keeping more difficult. Some employers opt to reimburse employees at a rate lower than the IRS standard. The employee can then subtract mileage reimbursements from their gross income or, if it is less, the IRS standard rate multiplied by the number of miles they drove for work-related purposes.
… But they should be aware of the FLSA kickback rule
Employers should take note of the Federal Labor Standards Act’s limited exception regarding mileage reimbursements if their staff members make the minimum wage or slightly above it. The kickback rule, which governs money returned to the employer in the form of improperly reimbursed mileage expenses, is a law governing employee mileage reimbursement. A wage and hour issue arises if the value of those alleged kickbacks drives the employee’s salary below the minimum wage.
Last year, two significant Domino’s Pizza franchises were required to appear in court to defend class-action lawsuits brought by delivery drivers who were paid a flat $1 per delivery fee. They claimed they were being underpaid by $1. 30 per delivery and $3. 25 per hour. A California suit alone involves hundreds of drivers. A second suit is pending in Georgia.
Companies can – and should – decline specific reimbursement requests
Therefore, does that mean that the law governing employee mileage reimbursement requires a company to pay each claim if it agrees to reimburse for miles driven for business purposes? Definitely not. Companies can and should establish policies that specify the requirements and rates for mileage reimbursement, similar to many other aspects of employment. If they believe they should refute a particular claim, they can then do so with assurance.
Starting with the standard language that requires employees to have current driver’s licenses and sufficient auto insurance Then, it should include all the information necessary to account for foreseeable contingencies, such as excluded activities like personal travel and commutes to and from home. There should be explanations of policy violations and accompanying discipline.
In order to claim the employer’s own tax deduction for mileage reimbursement, the documentation related to mileage reimbursement is crucial for expense control as well. A rigorous process that incorporates safeguards, welcomes inquiries, and has a monitoring system that will catch abuse produces accurate documentation.
2022 IRS Mileage Reimbursement Rates
What is the average cost per mile to drive a car in 2022?
17. Based on average costs for the 12 months ending on May 22, 99 cents per mile
How does the IRS verify mileage?
Regardless of your employment situation, you will probably be asked to record the following: the mileage for each business use. The IRS defines adequate records for your mileage log. the total mileage for the year. the date, location (your destination), and purpose of each trip (business)
How do you negotiate mileage reimbursement?
Tips for requesting mileage reimbursement from your employerPrepare your mileage in advance. Calculate how much this translates into cost. Complete your calculation. Discuss available reimbursement rates. Discuss a record-keeping process. Make it a deduction.
Do employers have to reimburse mileage in Wisconsin?
When traveling for work-related purposes, employees are entitled to reimbursement for their actual transportation costs, subject to the following restrictions: 916(9)(f)1.