Press "Enter" to skip to content

IRS Counts Excess Mileage Reimbursment as Wages

It’s not too common for employers to reimburse an employee more than the IRS suggested rate but it does happen. Some employers reimburse more because they don’t feel that the IRS rate is enough. Once, an business owner 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 the IRS mileage rate. While this is fine, the IRS has rules about excess mileage payments:

Any amount reimbursed over the IRS standard mileage rate is technically wages. Employees must claim this at tax time.

“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 6 cents for every mile. So she would have to claim 6000 cents (or 60 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.

Track Mileage to Avoid Over-payments

With Timesheets.com, employees can track their mileage against the current mileage rate so that exact payments can be issued and over-payments avoided.

 

Let us help you start tracking mileage!

Free online timesheets

Related Posts

11 Comments

  1. IRS Lowers Mileage Rate for 2014 | Small Business Tips and Tools
    IRS Lowers Mileage Rate for 2014 | Small Business Tips and Tools January 16, 2014

    […] Employers don’t have to reimburse employees for mileage, although it is generally good practice. The IRS rate is both a guide for employers and the rate employees can use to claim mileage deductions on their taxes when employers don’t reimburse. It is important to note that while employers don’t have to reimburse this rate exactly, if they reimburse over the rate, then employees must report that excess reimbursment as wages. […]

  2. How Much To Reimburse Employees For Mileage | The Timesheets Employee Management Blog
    How Much To Reimburse Employees For Mileage | The Timesheets Employee Management Blog November 18, 2014

    […] A company can reimburse its employees whatever it wants – from zero cents per mile to over the IRS maximum. There is no law mandating how much or how little to reimburse employees. Even if you don’t reimburse your employees, they can recover the costs on their taxes. Whatever amount an employer does not reimburse, employees can deduct on their taxes. If employers reimburse more, however, which is perfectly acceptable, employees have to claim this mileage excess as wages on their taxes. […]

  3. Paying Employees More Or Less Than the Standard Mileage Rate | The Timesheets Employee Management Blog
    Paying Employees More Or Less Than the Standard Mileage Rate | The Timesheets Employee Management Blog November 21, 2014

    […] important to know, however, that the IRS counts excess mileage reimbursement as wages and so the employee would need to claim that excess on his […]

  4. Richard Conrad
    Richard Conrad January 17, 2015

    If a 501(c)3 charitable agency pays more that the 14 cents per mi, is that also taxable income?

    • Peggy
      Peggy January 21, 2015

      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.

  5. Sue
    Sue May 20, 2015

    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?

  6. Zach
    Zach December 15, 2015

    If an employer decides to reimburse more than the standard mileage rate, is it up to the employee or the employer to make sure that the excess reimbursement is accounted for at tax time?

    • Peggy
      Peggy December 17, 2015

      Zach,

      Since the excess is counted as wages, the employee would need to report that to the IRS as wages.

  7. Treasurer First Congragational church
    Treasurer First Congragational church March 12, 2018

    Does this taxed income also apply to a minister in regards to reimbursed mileage?

  8. Treasurer First Congragational church
    Treasurer First Congragational church March 12, 2018

    Is reimbursed mileage taxable?

Leave a Reply

Your email address will not be published. Required fields are marked *