Reimbursement for the Business Use of a Personal Car

Employers may offer employees different perqs or benefits for a job, with one such item being reimbursement for the use of their car. Employers typically make their own policy for the reimbursement process. However, the Internal Revenue Service (IRS) places several restrictions on the reimbursement.

Facts

For 2010, the IRS allows standard mileage rates of 50 cents for business miles driven, 16.5 cents for medical or moving miles driven and 14 cents for service or charitable organization miles driven. While these are the maximum limits, employers can offer less for their reimbursement rates.

Features

Employers typically require employees to document the miles driven for a job or project on a company form. This form goes to a manager who will approve or disapprove the request and, if approved, then forward it to accounting for payment.

Considerations

Reimbursement plans are highly regulated by the IRS. Employers should carefully design their plan to be consistent with current law so employees and the company can avoid tax issues. Business expenses related to driving personal vehicles and accountable plans are a few options needing consideration by companies.

References

• Internal Revenue Service: IRS Announces 2010 Standard Mileage Rates
• Internal Revenue Service: Topic 510 - Business Use of Car