State:

National
Mileage reimbursement. The standard mileage reimbursement rate, effective January 1, 2017, is 53.5 cents per mile for all business miles driven. The standard mileage reimbursement rate is 17 cents per mile for medical or moving purposes and 14 cents per mile for service of charitable organizations. Employers that use the IRS rate or a lower rate may deduct the reimbursement as a business expense, and the payment need not be included in the employee's income. If the approved rate (or a lower rate) is used, the IRS considers that requirements to substantiate and adequately account for the expense are satisfied without extensive documentation of actual expenses. The employer may deduct reimbursements at a higher rate, but only if the reimbursements reflect the actual cost of the travel and only if the employer keeps adequate records to substantiate its outlays. Reimbursements for tolls, parking, etc., may be deducted in addition to the mileage allowance.
The business mileage rate decreased half a cent per mile, and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Company cars. The IRS also requires employees to report as earned income the value of their personal use of company automobiles. The government publishes an Annual Lease Value Table for the calculation of this sum, which can be obtained from the IRS. Social Security tax on this value must be withheld, but not federal income tax, if employees are notified of their potential tax liability.
Although the IRS does not presently require businesses to keep contemporaneous logs listing the details of every mile of business travel, employers should require employees who use personal cars for business to keep records of whom they went to see, when (time, date, and duration), and for what purpose, as well as the mileage and related expenses that were incurred. Organizations should have a statement of policy that includes those recordkeeping procedures, how reimbursement will be made, and a notice that reimbursements will only be made for company business.
Cost reduction. When employees use personal automobiles extensively for business purposes, the company might set up various mileage allowances to allow for differences in car makes and miles driven. Variable reimbursement rates are more complicated to administer, but will more accurately reflect the actual cost of operation of particular employees' cars and could substantially reduce the amount spent reimbursing employees for the use of their cars.
To protect against liability, employers should require employees who are expected to use their personal vehicles for company business to show proof of current insurance coverage. Employers should also include a “nonownership automobile liability insurance policy” as part of their own insurance coverage. This will provide insurance protection against claims for bodily injury and property damage, as well as costs for investigations and court proceedings that might result from work-related accidents.
For additional information on auto-use taxes and recordkeeping requirements, see IRS Publication 463, Travel, Entertainment, Gift & Car Expenses. This is available online at http://www.irs.gov/formspubs.
For information on the cost of operating various automobiles, contact the local American Automobile Association (AAA) chapter in your area. Samples for calculating the cost of driving different vehicles are posted on the Internet sites of local AAA chapters. For example, see http://exchange.aaa.com/automobiles-travel/automobiles/driving-costs/#.WG0RqmcixD8..
Last updated on January 3, 2017.
Related Topics:
National
Mileage reimbursement. The standard mileage reimbursement rate, effective January 1, 2017, is 53.5 cents per mile for all business miles driven. The standard mileage reimbursement rate is 17 cents per mile for medical or moving purposes and 14 cents per mile for service of charitable organizations. Employers that use the IRS rate or a lower rate may deduct the reimbursement as a business expense, and the payment need not be included in the employee's income. If the approved rate (or a lower rate) is used, the IRS considers that requirements to substantiate and adequately account for the expense are satisfied without extensive documentation of actual expenses. The employer may deduct reimbursements at a higher rate, but only if the reimbursements reflect the actual cost of the travel and only if the employer keeps adequate records to substantiate its outlays. Reimbursements for tolls, parking, etc., may be deducted in addition to the mileage allowance.
The business mileage rate decreased half a cent per mile, and the medical and moving expense rates each dropped 2 cents per mile from 2016. The charitable rate is set by statute and remains unchanged. The standard mileage rate for business is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs. Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.
Company cars. The IRS also requires employees to report as earned income the value of their personal use of company automobiles. The government publishes an Annual Lease Value Table for the calculation of this sum, which can be obtained from the IRS. Social Security tax on this value must be withheld, but not federal income tax, if employees are notified of their potential tax liability.
Although the IRS does not presently require businesses to keep contemporaneous logs listing the details of every mile of business travel, employers should require employees who use personal cars for business to keep records of whom they went to see, when (time, date, and duration), and for what purpose, as well as the mileage and related expenses that were incurred. Organizations should have a statement of policy that includes those recordkeeping procedures, how reimbursement will be made, and a notice that reimbursements will only be made for company business.
Cost reduction. When employees use personal automobiles extensively for business purposes, the company might set up various mileage allowances to allow for differences in car makes and miles driven. Variable reimbursement rates are more complicated to administer, but will more accurately reflect the actual cost of operation of particular employees' cars and could substantially reduce the amount spent reimbursing employees for the use of their cars.
To protect against liability, employers should require employees who are expected to use their personal vehicles for company business to show proof of current insurance coverage. Employers should also include a “nonownership automobile liability insurance policy” as part of their own insurance coverage. This will provide insurance protection against claims for bodily injury and property damage, as well as costs for investigations and court proceedings that might result from work-related accidents.
For additional information on auto-use taxes and recordkeeping requirements, see IRS Publication 463, Travel, Entertainment, Gift & Car Expenses. This is available online at http://www.irs.gov/formspubs.
For information on the cost of operating various automobiles, contact the local American Automobile Association (AAA) chapter in your area. Samples for calculating the cost of driving different vehicles are posted on the Internet sites of local AAA chapters. For example, see http://exchange.aaa.com/automobiles-travel/automobiles/driving-costs/#.WG0RqmcixD8..
Last updated on January 3, 2017.
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