IRS Counts Excess Mileage Reimbursment as Wages

The IRS standard mileage rate is currently 57.5 cents per mile in 2015. This is the rate employees generally expect to be reimbursed when they drive their personal vehicles for work purposes, though it is not mandatory for employers to reimburse at that rate.

In fact, employers can reimburse at any rate they choose or not reimburse at all. (Read more about how much to reimburse employees here.)

It’s not too common for employers to reimburse an employee more than the IRS suggested rate but it does happen. I’ve heard of employers who reimburse more simply because they think 57.5 cents isn’t enough. Once, an employer even told me that he didn’t know the rate so he wrote a check for $100 each week.

In either of these scenarios the employee receives more than 57.5 cents per mile. While this is fine, the IRS has rules about excess mileage payments:

Any reimbursed amount over the IRS standard rate is technically considered wages and must be claimed at tax time on the employee’s W2.

“If you were reimbursed for travel or transportation under an accountable plan, but at a per diem or mileage rate that exceeds the Federal rate, the excess should be included in the wages on your Form W-2.” IRS.gov

Example of Excess Mileage Calculation

As an example, if an employer chooses to pay 60 cents per mile and the employee drove 1000 miles in one year, that employee would have to claim the excess of 2.5 cents for every mile. So she would have to claim 2500 cents (or 25 dollars) on her taxes in addition to her regular wages.

If employers pay employees less than the standard rate, employees can deduct that amount on their taxes.

7 Comments

    1. I have not read anything on the IRS.gov pages that would lead me to believe otherwise, but if you’re not sure, you could run it by your tax specialist.

  1. Can an employer cap the amount of miles driven? So if an employee drives 400 miles that month at a rate of 30 cents per mile but their cap for the month was 300, can the employer decide not to pay over the 300 miles? Thus reducing the miles driven by 100?

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s