If you use your car to perform your job responsibilities, you can reimburse some of your expenses. But, your employer will not reimburse you if you use your car in driving to and from your work. He may also opt to provide your car allowance.
How Much is Employee Reimbursement?
Your employee reimbursement can differ, depending on the business sector or your employer. However, for many businesses, employers use IRS’s Standard Mileage Rate or the GSA’s Privately-owned Vehicle Reimbursement Rate.
The IRS set the 2018 mileage rate at 54.5 cents per mile. In 2017, the rate was 53.5 cents. But, it was 54 cents and 57.5 cents in 2016 and 2015, respectively. This rate includes the cost of registration, oil, insurance, gas, and maintenance. If you use your car regularly for your job duties, you can enjoy a significant deduction.
Many employers reimburse their employees using the GSA or IRS rate. They do so because they can use the amount as a deduction on their corporate income tax return. The IRS requires that employers reimburse their employees’ gas mileage separate from the payroll without taxes. As such, employers use the accounts payable system in paying their employees to comply with the IRS laws.
If you get reimbursements that are close to the IRS or GSA rate, you are receiving a fair deal. If not, you can always deduct the unreimbursed amount on your personal income tax.
Government Employee Gas Mileage Reimbursement
On the other hand, government employees receive mileage reimbursements using the GSA rate. But, there must be authorization for the use of their own cars.
Requirements for Gas Mileage Reimbursement
To be able to reimburse gas mileage, you have to keep a mileage log, receipt of other allowable expense pertaining to your car, and gas receipts. You cannot receive any reimbursements if you do not keep an expense report. In fact, your employer can take disciplinary action against you if there is proof that you made a fraudulent claim.
Although it is a tedious practice, you have to keep pen and paper in your car to record your trip details immediately. Also, you can install a mileage tracking app to monitor your official trips in a mileage log. You can download or print this log any time you need it. A mileage tracking app is an efficient tool that you can use to prepare your expense report.
Tax Consequences of Employee Gas Mileage Reimbursement
Your reimbursements are tax-free. But, for car repairs and maintenance, your employer cannot pay for it without tax consequences. Also, expenses that have a direct relation to business transportation are tax-free if you can furnish receipts. If you are uncertain about tax regulations regarding gas mileage reimbursement, consult your accountant.
Car Allowance Option
Instead of paying for mileage reimbursement, your employer can provide you with car allowance. He can do if at least 5 of his employees have it. A car allowance is a fixed rate that he pays quarterly to his employees. If you avail of it, you can no longer avail of gas mileage reimbursement.