Employees may receive reimbursement for using their personal vehicle for business purposes through mileage reimbursement, which is often based on government guidelines. Employers may use standard mileage rates or set their own rates. Reimbursement is usually calculated by multiplying the number of company miles driven by the reimbursement rate. Home-to-work travel is typically not reimbursable. Mileage reimbursement may be tax-deductible for employers and individuals.
When an employee uses his personal vehicle to conduct business for the benefit of his employer, he may receive reimbursement for the associated costs in the form of mileage reimbursement. In this way, a company absorbs part of the fuel costs and wear and tear of automobiles at a predetermined rate, easing the financial burden on employees. In the US, this is an optional benefit; as such, the US government may also allow a tax deduction for companies or individuals who use cars for business purposes. Usually, companies base the mileage reimbursement rate on guidelines set by national government agencies, such as the Internal Revenue Service (IRS) in the United States, but not always.
Employees who work for organizations that offer mileage reimbursement are generally required to provide an accurate record of the company miles they are flown. Most companies have a standard form, called an expense report, in which the employee completes pertinent information outlining the places they’ve driven, the number of miles they’ve traveled to get there, and the business purpose of any particular visit. When management approves the expense report, the employee is then reimbursed for the costs incurred. This is usually calculated by taking the number of company miles flown and multiplying that figure by the current reimbursement rate set by the employer.
In the United States, the IRS publishes optional standard mileage rates based on the cost of operating a car. The gas prices of the previous year are generally also considered in the estimate. Employers may choose to reimburse staff members based on this suggested rate. They can also deviate from it at their discretion.
Some companies choose not to offer mileage refunds at all. When they do, however, they may then be entitled to include that expense as a tax deduction on their business returns. Similarly, people who do not receive mileage reimbursement from their employers may also be eligible to have car expenses itemized as a deduction on their personal tax returns.
Travel from a person’s home to a place of work is usually non-reimbursable for either a work unit or an individual. In other words, if a person typically drives 20 miles a day from his home to his office, she usually can’t claim it as a legitimate expense. During the day, however, if he travels to other places to make sales calls or conduct business for his employer, he can usually claim compensation for the additional travel when mileage reimbursement is offered.
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