Originally Posted by gwm9
We have employees who used their personal vehicles for business trip, but filled their gas up on our company card. How do I figure out the per mile rate to reimburse?
The cost of operating a car or other vehicle is tax-deductible when driving for business purposes.you can elect to pay an actual cost method, a standard mileage rate or a fixed and variable rate allowance;so, you need to check with your state's requirements and create a company policy so everyone knows the rules. You can only apply the standard mileage rate for your EE if; you/your EE have used the standard mileage rate since you first leased or bought the car; you/your EE have leased a car and intend to use the standard mileage rate deduction for the entirety of the lease; You/your EE use four vehicles or fewer in your daily business operations.You cannot use the standard mileage rate if:You/your EE have used the actual expense tax deduction and claimed the accelerated depreciation deduction in previous years; You/your EE have claimed a Section 179 deduction on the vehicle. For mileage use, you will calculate total miles driven and multiply it by the standard mileage rate. For example: The mileage rate from January to June was $.51. The mileage rate from July to December was $.55. then, Your EE drove 5K miles from January to June for business travel and 5K miles from July to December. Your standard mileage calculation would be ; 5K *$.51=2550
5K*$.55= 2750; 2550 + 2750 = $5300 which would be your total. Your EE can also deduct both tolls and parking fees under mileage method;
In reimbursing your EE, you can choose either accountable plan or non accountable plan; ccountable Plan has several requirements that must be met. First, the expenses must have been paid to the employee or incurred by the employee while performing services for the employer. Second, the employee must be required to provide documentation to the employer to substantiate the business expenses and must do so in a timely manner. Lastly, any reimbursements that exceed substantiated expenses must be returned to the employer in a timely manner. Under accountable plan you as an ER do not include EE reimbursement on his/her W2.
under Non-accountable Plan, in contrast, the employee does not need to substantiate business expenses and is not required to return any excess amounts. For example, you , as an employer, may provide an EE with a set amount for car expenses while traveling on business. Assume the reimbursement plan provides $75 per day for the expenses and the employee does not need to provide receipts for expenses. The employee is also not required to return the difference between what he/she actually spends and the $75 allowance. This would be an example of a non-accountable plan. The assumption in this case is that the employee typically will not spend the full allowance and therefore is receiving some form of payment for services. When employees are reimbursed under a non-accountable plan, the payments will be included as taxable income on his/her W2, but may be deductible as an itemized deduction on his/her personal income tax return aslongas he/she itemizes dedcutions on SCh A of 1040. In the example above, the full $75 allowance will be included in the employee's gross income and the actual expenses incurred will be included as an itemized deduction for employee business expense, subject to personal income tax limitations .