Mileage Reimbursment Laws

If an employee pays out of pocket for his own mileage, the law requires the employer to reimburse him. The IRS has set standard mileage reimbursement rates, but the employer has the option to pay the standard rates, lower them or raise them. As long as the mileage is reimbursed, the employer is in the clear. The employee will have to pay taxes on the mileage reimbursement if the rates the employer pays out are higher than IRS standards.

Mileage Reimbursement

Mileage reimbursement is reimbursement for a distance an employee has driven on all business-related trips. The employer sends the employee out to conduct business with clients or to check on other company sites, if the company has multiple locations. If the distance is drivable, the employer is responsible for reimbursing the employee for any expenses she incurs, including mileage. This is just like funding the travel accommodations for a business trip, such as airfare, ground transportation and hotel stay. The only difference is the car may be owned by the company or the employee. Either way, the mileage it takes to get to business-related trips must be reimbursed if paid by the employee.

Home Office and Company Office

The law requires that an employer pay mileage for the miles a person has driven on all work-related business. Some individuals in sales may work from both the company's office and their home office. In these instances, they will be credited for the mileage it takes to drive from the company office on the business-related trip. If the mileage is less from the office than it would be from his home, the employee still has to start calculating mileage as if he were leaving the company office. No other employee is paid to drive to work, and the commuter is no exception.

Rates Lower Than IRS Standards

Even though employers are required by the state laws to reimburse individuals for all work-related mileage expenses, there are some exceptions. The IRS sets a standard mileage rate per mile that employers should pay their employees. However, in California, the law states that the employer can pay lower rates than those set by the IRS. The decision is at their digression. The mileage will still need to be paid, regardless of the rate the employer has set.

Rates Higher Than IRS Standards

The IRS rates may be set lower than what the employer feels they should be. In these instances, the employer may choose to pay a higher mileage rate. However, by law the IRS can consider the mileage as wages of the employee. The mileage reimbursement will therefore be taxable by the IRS if the reimbursement is paid at a higher rate.

Terminated Employees

The law requires that the mileage turned in by employees who have been terminated still be paid by the employer. Mileage reimbursement should be treated like all wages in this predicament. The mileage should be paid on the normal pay period, or the day that the employee resigned or was terminated. Not paying the mileage to the employees could result in penalties handed down by the courts to the employer.

References

• California Auto Mileage Reimbursement