Mileage Reimbursement

Forum2 · March 2005

The IRS mileage reimbursement for 2005 is 40.5 cents per mile. Do private companies have to reimburse employees that amount?

Parabeaglex2 · March 2005

I don't think you're required to. We do reimburse in accordance with IRS guidelines, as a matter of policy, but I don't think you're under any obligation to reimburse at that level. We do it because our traveling employees keep tabs on that sort of information - if we tried to reimburse less than the IRS allows we'd have an open revolt on our hands!

Don't know about the tax ramifications (i.e., if the ee can claim the difference between what you reimbursed and what they allow as an expense).

Don D · March 2005

It's the federally allowed maximum one can claim on their tax return (if reimbursed). An employer is not required to pay it. You can claim the difference in that figure and what the employer reimburses (if you want to be legal).

Forum2 · March 2005

Thank you

stretched2thin · March 2005

I heard that the employer might have to provide a 1099 for the difference if they don't. Might check with your CPA, if considering doing less than the IRS amount.

NaeNae55 · March 2005

You can reimburse more, the same, or less. If you reimburse more you must report the difference as income. If less, the employee can deduct the difference from their taxes.

Examples:
Joe drives 100 miles on company business. The company reimburses Joe $40.50 (.405 cents per mile). The company can claim this as a legitimate business expense on their taxes, but no reporting is required for Joe on his W2 or his income taxes.

Joe drives 100 miles on company business. The company reimburses Joe $50.00. The company claims $40.50 as mileage expense, and $9.50 through wages/salaries. Joe earned $20,000.00 this year, but the company will report $20,009.50 on his W2 (NOT a 1099).

Joe drives 100 miles on company business. The company reimburses him $20.00. The company will claim $20.00 as mileage expense. Joe can claim $20.50 on his income taxes. If the company doesn't reimburse him at all, he can claim the entire amount.

IMPORTANT: This is all assuming regular company business. The IRS has different reimbursement rates for different types of things (moving and charity, for instance), so be careful as to what rate you are using.

Good luck!

E Wart · April 2005

NaeNae is right. You can reimburse whatever you want. However, how you and your employee report it is the problem (just like if employees' use company car for personal mileage you have to include portions of this as income on their W-2 or provide them with other tax forms for it to be considered income on their taxes.)
It just makes it cleaner and easier if you do what the IRS says. (Otherwise, employees have income or additional deductions.)

E Wart

Mileage Reimbursement

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